TAX RESEARCH MEMO #2 CASE INFORMATION-AC312 You previously provided tax advice to Chandler and Monica Bing,...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
TAX RESEARCH MEMO #2 CASE INFORMATION-AC312 You previously provided tax advice to Chandler and Monica Bing, owners of Bing Bakery, Inc. (Bing), related to their newly created corporation, Bing Bakery, Inc. (Bing). Since you did such a thorough job before, they are seeking additional tax advice from you now. As a reminder, on May 17, 2022, Chandler and Monica Bing incorporated and began operating Bing Bakery, Inc. (Bing). Bing sells various baked goods online to customers throughout the U.S. Bing's mission is to provide high quality baked goods to customers in a convenient manner without sacrificing taste and freshness. Monica leads the operations side of the business as the head chef, and Chandler leads the administrative side of the business as the CEO of the company. It is now June 15, 2022, and the Bings are trying to determine if an S election should be made for Bing or not. They have heard that if an S election is desired that it needs to be made by a certain date in order to be effective for the current year. As a result, they have come to you with the following thoughts/questions: 1. They have heard that S corporations are "flow-through entities", and they are unsure what that means. In determining whether an S election should be made or not, the Bing's are especially curious about the impact on their overall tax liability (in consideration of both entity and individual tax). Specifically, they are requesting that you compute the estimated overall tax liability if they maintain C corporation status vs. if an S election is made. 2. Other than differences in taxation, they are also wanting to know if there are any limitations for S corporations. And if there are, is this something they should be concerned about? 3. Finally, they are concerned that it may be too late for an S election to go into effect for their initial tax return for 2022. If they do decide to make an S election, is it too late to be effective for Bing's 2022 return? The Bings also provided the following additional information: They estimate that Bing's 2022 taxable income (net of allowable business deductions) will be approximately $90,000. The Bings' Individual marginal income tax rate is 24%, and their dividend tax rate is 15%. In addition, they are subject to net investment income tax. Bing will distribute all after-tax earnings to the Bings, the only shareholders of Bing, annually. Bing does not generate qualified business income (QBI). Based on the information provided, the Bings request that you prepare a tax research memo to address their questions so that they can make an informed decision as to whether to elect S status or not. TAX RESEARCH MEMO #2 CASE INFORMATION-AC312 You previously provided tax advice to Chandler and Monica Bing, owners of Bing Bakery, Inc. (Bing), related to their newly created corporation, Bing Bakery, Inc. (Bing). Since you did such a thorough job before, they are seeking additional tax advice from you now. As a reminder, on May 17, 2022, Chandler and Monica Bing incorporated and began operating Bing Bakery, Inc. (Bing). Bing sells various baked goods online to customers throughout the U.S. Bing's mission is to provide high quality baked goods to customers in a convenient manner without sacrificing taste and freshness. Monica leads the operations side of the business as the head chef, and Chandler leads the administrative side of the business as the CEO of the company. It is now June 15, 2022, and the Bings are trying to determine if an S election should be made for Bing or not. They have heard that if an S election is desired that it needs to be made by a certain date in order to be effective for the current year. As a result, they have come to you with the following thoughts/questions: 1. They have heard that S corporations are "flow-through entities", and they are unsure what that means. In determining whether an S election should be made or not, the Bing's are especially curious about the impact on their overall tax liability (in consideration of both entity and individual tax). Specifically, they are requesting that you compute the estimated overall tax liability if they maintain C corporation status vs. if an S election is made. 2. Other than differences in taxation, they are also wanting to know if there are any limitations for S corporations. And if there are, is this something they should be concerned about? 3. Finally, they are concerned that it may be too late for an S election to go into effect for their initial tax return for 2022. If they do decide to make an S election, is it too late to be effective for Bing's 2022 return? The Bings also provided the following additional information: They estimate that Bing's 2022 taxable income (net of allowable business deductions) will be approximately $90,000. The Bings' Individual marginal income tax rate is 24%, and their dividend tax rate is 15%. In addition, they are subject to net investment income tax. Bing will distribute all after-tax earnings to the Bings, the only shareholders of Bing, annually. Bing does not generate qualified business income (QBI). Based on the information provided, the Bings request that you prepare a tax research memo to address their questions so that they can make an informed decision as to whether to elect S status or not.
Expert Answer:
Related Book For
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr
Posted Date:
Students also viewed these accounting questions
-
You are considering the purchase of a condominium to use as a rental property. You estimate that you can rent the condominium for $ 1 comma 2 0 0 per month and that taxes, insurance, and maintenance...
-
Why would a dollar in hand today be worth more than a dollar to be received in the future? How does this affect cash flows? Why would this be important to Healthcare Finance Management?
-
2. Consider the Cagan model of nominal exchange rates. We will consider the impact on the exchange rate of an expectation of quantitative easing in the foreign economy. et = - (1) (177) [ms-oys + m...
-
Three partners. Ankamah, Kofi and David share profit and losses in the ratio 5: 3:2 for the year ending 31/12/2016. The profit generated from either business is $600,000. Partners' contributions are...
-
A basic principle of federal tax law is that a return of investment is nontaxable. Discuss the application of this principle to Social Security payments.
-
On July 1, 2018, the Foster Company sold inventory to the Slate Corporation for $300,000. Terms of the sale called for a down payment of $75,000 and three annual installments of $75,000 due on each...
-
David Bowie, a sole trader, has extracted the following trial balance as at 31 January 20x7. Required 1 Prepare the profit and loss accounts for the year ended 31 January 20x7. 2 Prepare the balance...
-
Many studies on rats and mice have established that charred meat grilled over hot coals causes cancer. Since the government cannot easily regulate home cooking methods, an alternative method has been...
-
if you were an employer, would you require either employees or job applicants to pass an honesty exam? explain the moral principles that support your position
-
Mrs. Villaviray observed that traditionally, the marketing system for locally grown cashew fruits has been focused on cashew nuts. The cashew farmers earn low income from their cashew trees. This is...
-
Actual lengths of stay at a hospital's emergency department in 2009 are shown in the following table (rounded to the nearest hour). Length of stay is the total of wait and service times. Some longer...
-
What is the definition of IRR and how is it calculated? 2. How does IRR differ from other financial metrics such as NPV (Net Present Value)? 3. What does a positive IRR indicate in terms of the...
-
(a) Hamiltonian in the sublattice space. (i) By performing the Fourier transformations |n, A) = keink |k, A) and (n, B| = eink (k, B| (with N the total number of sites), show that the Hamiltonian can...
-
Solve: b+185 = -19.
-
How does risk and uncertainty factor into the calculation and interpretation of IRR? 10. How can sensitivity analysis be used to assess the impact of changing IRR assumptions? 11. Are there any...
-
Instructions On January 1, the first day of the fiscal year, a company issues an $1,350,000, 11%, five-year bond that pays semiannual interest of $74,250 ($1,350,000 x 11% x %), receiving cash of...
-
Inexhaustible collections of ONPOs are not required to be capitalized or depreciated, if certain criteria are met. Why is this so, and what accounting and reporting recognition, if any, is required...
-
It is impossible to have a standard management accounting system as it needs to match the needs of an operation. Discuss this statement from the perspective of hospitality, tourism or events...
-
What is the difference between cash and profits?
-
From the perspective of either a hotel manager, events manager, or a tour operator discuss the role strategic managerial accounting can have in aiding management decision making.
Study smarter with the SolutionInn App