Hi,

I have a Taxation course HW. Anyone's helps greatly appreciated. Deadline is May 28th Saturday by noon. Thanks for your help!

Entities Taxation Case Comparison of the Forms of Doing Business -----------------------------------------------------------------------------------------------------------------------------Facts: Richardson Company is in its first year of operations as a hardware and software retailer (with occasional consulting jobs). Richardson reports the following 2011 results (without respect to the type of entity): \"Business\" Income: Sales (net of returns and allowances) $ 490,000 Gross Consulting Fees Collected 30,000 Dividend Income (5% investment in Novice Software Co.) 4,000 Loss on Sale of Novice Stock ($28,000 - $33,000, held 11 months) (5,000) \"Business\" Expenses and Costs: Cost of Goods Sold (142,200) Salaries of 5 employees other than owner Tony Richardson ($30,000 each) (150,000) Payroll taxes paid on employees [($150,000 x .0765) + ($35,000 x .062)] (13,645) Health insurance coverage for employees ($3,000 x 5) (15,000) Retirement plan contributions for employees (10% of salaries) (15,000) MACRS depreciation on various company assets (35,748) Interest, rent, utilities, insurance, supplies, and miscellaneous expenses (59,337) Contributions to public charities (13,300) Compensation to Owners of \"Business\": Reasonable salary compensation to Tony Richardson (65,000) Other cash payments to owners (20,000) Health insurance coverage for Tony Richardson (3,000) Retirement plan contribution for owner (10% of \"reasonable salary\") (5,500) Tony and Ellen Richardson (both age 53) file a joint federal income tax return in 2011. They do not have any dependents. In addition to any compensation/income from the business described above, Ellen received a salary of $41,300 from ED Industries. Tony and Ellen also received $1,400 personal interest on a joint account, $1,200 personal dividends from jointly-held Thomson Company stock, and $9,200 from the sale of 100 shares of Thomson stock (originally acquired 5 years ago for $3,100). Tony and Ellen's personal expenses for 2011 include $2,600 personal property taxes, $12,400 state income taxes, 10,300 charitable contributions (not including the amounts mentioned above), $8,800 interest on personal home mortgage, and $2,600 of unreimbursed employee expenses by Ellen. Required: 1. For each of the following entity assumptions, determine the total taxes paid for tax year 2011 by completing the schedule shown below. Also, please show all of your calculations. Assuming that Richardson Company is operated as a sole proprietorship, determine the Richardson's final federal income tax liability (including any self-employment tax) (Note - the assumption that the pension contribution on Tony's behalf is 10% of the $65,000 \"reasonable salary\" is somewhat unrealistic (normally, the amount would be based on the sole proprietorship income), but this assumption is made to make the four entity results roughly comparable). Assuming that Richardson Company is operated as a partnership (assuming that Tony Richardson is essentially a 100% partner, with a minimal interest held by Ellen), determine the Richardson's final federal income tax liability (including any self-employment tax). For these purposes, allocate 100% of all partnership items to Tony Richardson. (The same pension contribution assumption mentioned in \"a\" also applies here.) Assuming that Richardson Company is operated as an S corporation (with Tony Richardson [DD] as essentially a 100% shareholder), determine the Richardson's final federal income tax liability and any FICA taxes paid on Tony's compensation by Tony and by Richardson Company Once again, allocate 100% of all S corporation items to Tony Richardson. Assuming that Richardson Company is operated as a C corporation (with Tony Richardson (DD) as a 100% shareholder), determine the final corporate income tax liability of Richardson Co., the Richardson's final federal income tax liability any FICA taxes paid on Tony's compensation by Tony and by Richardson Company Answer Summary S. Propr P'ship Corporate Income Taxes Paid NA NA FICA Tax on TR - Paid by TR NA NA FICA Tax on TR - Paid by Company NA NA Unemp. Tax on TR - Paid by Company NA NA Self-Employment Tax Paid by TR S Corp C Corp NA NA NA Fed Inc Tax Paid by Richardsons Total Taxes 2. Prepare a tax memo and draft client letter indicating your recommendation to the Richardsons as to the preferred entity. Provide the appropriate tax citations and explain why you believe this method will be the best method. Your tax partner wants the material to be provided in an easy to read format for these clients. ANSWER 1. Entities Taxation Case Comparison of the Forms of Doing Business -----------------------------------------------------------------------------------------------------------------------------Facts: Richardson Company is in its first year of operations as a hardware and software retailer (with occasional consulting jobs). Richardson reports the following 2011 results (without respect to the type of entity): \"Business\" Income: Sales (net of returns and allowances) $ 490,000 Gross Consulting Fees Collected 30,000 Dividend Income (5% investment in Novice Software Co.) 4,000 Loss on Sale of Novice Stock ($28,000 - $33,000, held 11 months) (5,000) \"Business\" Expenses and Costs: Cost of Goods Sold (142,200) Salaries of 5 employees other than owner Tony Richardson ($30,000 each) (150,000) Payroll taxes paid on employees [($150,000 x .0765) + ($35,000 x .062)] (13,645) Health insurance coverage for employees ($3,000 x 5) (15,000) Retirement plan contributions for employees (10% of salaries) (15,000) MACRS depreciation on various company assets (35,748) Interest, rent, utilities, insurance, supplies, and miscellaneous expenses (59,337) Contributions to public charities (13,300) Compensation to Owners of \"Business\": Reasonable salary compensation to Tony Richardson (65,000) Other cash payments to owners (20,000) Health insurance coverage for Tony Richardson (3,000) Retirement plan contribution for owner (10% of \"reasonable salary\") (5,500) Tony and Ellen Richardson (both age 53) file a joint federal income tax return in 2011. They do not have any dependents. In addition to any compensation/income from the business described above, Ellen received a salary of $41,300 from ED Industries. Tony and Ellen also received $1,400 personal interest on a joint account, $1,200 personal dividends from jointly-held Thomson Company stock, and $9,200 from the sale of 100 shares of Thomson stock (originally acquired 5 years ago for $3,100). Tony and Ellen's personal expenses for 2011 include $2,600 personal property taxes, $12,400 state income taxes, 10,300 charitable contributions (not including the amounts mentioned above), $8,800 interest on personal home mortgage, and $2,600 of unreimbursed employee expenses by Ellen. Required: 1. For each of the following entity assumptions, determine the total taxes paid for tax year 2011 by completing the schedule shown below. Also, please show all of your calculations. Assuming that Richardson Company is operated as a sole proprietorship, determine the Richardson's final federal income tax liability (including any self-employment tax) (Note - the assumption that the pension contribution on Tony's behalf is 10% of the $65,000 \"reasonable salary\" is somewhat unrealistic (normally, the amount would be based on the sole proprietorship income), but this assumption is made to make the four entity results roughly comparable). Income ($18,730) Revenue ($519,000) - Expenditure ($537,730) Employment Income Interest Dividend Property Income Total Income 65,000 Losses, gifts of assets to charities Net Income (10,300) 47,770 Personal Allowances Taxable Income 20,000 130,370 (Is should be 67,770???) Tax Liability 13,037 1,400 1,200 9,200 58,070 130,370 x 10% Less Tax Credit on Dividends (250) 5,000 x 5% Repayable $12,787 What should have ????? number then we can find the 130,370. Also where did you find the 5,000? Assuming that Richardson Company is operated as a partnership (assuming that Tony Richardson is essentially a 100% partner, with a minimal interest held by Ellen), determine the Richardson's final federal income tax liability (including any self-employment tax). For these purposes, allocate 100% of all partnership items to Tony Richardson. (The same pension contribution assumption mentioned in \"a\" also applies here.) Income ($18,730) Revenue ($519,000) - Expenditure ($537,730) Employment Income 106,300 $65,000 + $41,300 Interest Dividend Property Income Total Income Reliefs Losses, gifts of assets to charities Net Income 1,400 1,200 9,200 118,100 (Is should be 99,370???) 15,000 (Is this health or retirement?) 2600 100,500 Personal Allowances Taxable Income 20,000 120,500 Tax Liability 12,500 120,500 x 10% Less Tax Credit on Dividends (500) (Is should be $250???) 5,000 x 5% Repayable $12,000 You're below calculations have mistaken same as above... Assuming that Richardson Company is operated as an S corporation (with Tony Richardson [DD] as essentially a 100% shareholder), determine the Richardson's final federal income tax liability and any FICA taxes paid on Tony's compensation by Tony and by Richardson Company Once again, allocate 100% of all S corporation items to Tony Richardson. Income (Income-Expenses) Employment Income Ellen Salary Interest Dividend Property Income ($18,730) $41,300 $1,400 $1,200 $9,200 Total Income $34,370 Reliefs $15,000 Losses, gifts of assets to charities $2,600 Net Income $16,770 Personal Allowances 0 Taxable Income $16,770 Tax Liability (10% of $16,770) $1,6770 Less Tax Credit On Dividends(5% of ($500) 5,000) Tax Payable $1,770 Assuming that Richardson Company is operated as a C corporation (with Tony Richardson (DD) as a 100% shareholder), determine the final corporate income tax liability of Richardson Co., the Richardson's final federal income tax liability any FICA taxes paid on Tony's compensation by Tony and by Richardson Company Gross profit (Income-Expenses) Dividends from 10% Owned Corporation Interest Gain on Sale of Depreciable property Installment on gain on sale of property Gross Income Operating Expenses Depreciation Amortization on property Dividends Received Taxable Income Regular Tax Liability (10% of $16,770) Less Tax Credit On Dividends(5% of 5,000) Tax Payable $18,730 $4,300 $400 $200 $1,200 $24,830 $15,000 $2,600 $16,770 4,000 $9,560 $9,560 $478 $478 Answer Summary S. Propr P'ship S Corp C Corp Corporate Income Taxes Paid NA NA NA $478 FICA Tax on TR - Paid by TR NA NA $1,770 $478 FICA Tax on TR - Paid by Company NA NA $70 $26 Unemp. Tax on TR - Paid by Company NA NA $86 $46 Self-Employment Tax Paid by TR $1,287 $896 NA NA Fed Inc Tax Paid by Richardsons $10,787 $6,400 $140 $28 $12,074 $7,296 $2,066 $1,056 Total Taxes 2. Prepare a tax memo and draft client letter indicating your recommendation to the Richardsons as to the preferred entity. Provide the appropriate tax citations and explain why you believe this method will be the best method. Your tax partner wants the material to be provided in an easy to read format for these clients. ANSWER 1. Entities Taxation Case Comparison of the Forms of Doing Business -----------------------------------------------------------------------------------------------------------------------------Facts: Richardson Company is in its first year of operations as a hardware and software retailer (with occasional consulting jobs). Richardson reports the following 2011 results (without respect to the type of entity): \"Business\" Income: Sales (net of returns and allowances) $ 490,000 Gross Consulting Fees Collected 30,000 Dividend Income (5% investment in Novice Software Co.) 4,000 Loss on Sale of Novice Stock ($28,000 - $33,000, held 11 months) (5,000) \"Business\" Expenses and Costs: Cost of Goods Sold (142,200) Salaries of 5 employees other than owner Tony Richardson ($30,000 each) (150,000) Payroll taxes paid on employees [($150,000 x .0765) + ($35,000 x .062)] (13,645) Health insurance coverage for employees ($3,000 x 5) (15,000) Retirement plan contributions for employees (10% of salaries) (15,000) MACRS depreciation on various company assets (35,748) Interest, rent, utilities, insurance, supplies, and miscellaneous expenses (59,337) Contributions to public charities (13,300) Compensation to Owners of \"Business\": Reasonable salary compensation to Tony Richardson (65,000) Other cash payments to owners (20,000) Health insurance coverage for Tony Richardson (3,000) Retirement plan contribution for owner (10% of \"reasonable salary\") (5,500) Tony and Ellen Richardson (both age 53) file a joint federal income tax return in 2011. They do not have any dependents. In addition to any compensation/income from the business described above, Ellen received a salary of $41,300 from ED Industries. Tony and Ellen also received $1,400 personal interest on a joint account, $1,200 personal dividends from jointly-held Thomson Company stock, and $9,200 from the sale of 100 shares of Thomson stock (originally acquired 5 years ago for $3,100). Tony and Ellen's personal expenses for 2011 include $2,600 personal property taxes, $12,400 state income taxes, 10,300 charitable contributions (not including the amounts mentioned above), $8,800 interest on personal home mortgage, and $2,600 of unreimbursed employee expenses by Ellen. Required: 1. For each of the following entity assumptions, determine the total taxes paid for tax year 2011 by completing the schedule shown below. Also, please show all of your calculations. Assuming that Richardson Company is operated as a sole proprietorship, determine the Richardson's final federal income tax liability (including any self-employment tax) (Note - the assumption that the pension contribution on Tony's behalf is 10% of the $65,000 \"reasonable salary\" is somewhat unrealistic (normally, the amount would be based on the sole proprietorship income), but this assumption is made to make the four entity results roughly comparable). Income ($18,730) Revenue ($519,000) - Expenditure ($537,730) Employment Income Interest Dividend Property Income Total Income 65,000 Losses, gifts of assets to charities Net Income (10,300) 47,770 Personal Allowances Taxable Income 20,000 130,370 (Is should be 67,770???) Tax Liability 13,037 1,400 1,200 9,200 58,070 130,370 x 10% Less Tax Credit on Dividends (250) 5,000 x 5% Repayable $12,787 What should have ????? number then we can find the 130,370. Also where did you find the 5,000? Assuming that Richardson Company is operated as a partnership (assuming that Tony Richardson is essentially a 100% partner, with a minimal interest held by Ellen), determine the Richardson's final federal income tax liability (including any self-employment tax). For these purposes, allocate 100% of all partnership items to Tony Richardson. (The same pension contribution assumption mentioned in \"a\" also applies here.) Income ($18,730) Revenue ($519,000) - Expenditure ($537,730) Employment Income 106,300 $65,000 + $41,300 Interest Dividend Property Income Total Income Reliefs Losses, gifts of assets to charities Net Income 1,400 1,200 9,200 118,100 (Is should be 99,370???) 15,000 (Is this health or retirement?) 2600 100,500 Personal Allowances Taxable Income 20,000 120,500 Tax Liability 12,500 120,500 x 10% Less Tax Credit on Dividends (500) (Is should be $250???) 5,000 x 5% Repayable $12,000 You're below calculations have mistaken same as above... Assuming that Richardson Company is operated as an S corporation (with Tony Richardson [DD] as essentially a 100% shareholder), determine the Richardson's final federal income tax liability and any FICA taxes paid on Tony's compensation by Tony and by Richardson Company Once again, allocate 100% of all S corporation items to Tony Richardson. Income (Income-Expenses) Employment Income Ellen Salary Interest Dividend Property Income ($18,730) $41,300 $1,400 $1,200 $9,200 Total Income $34,370 Reliefs $15,000 Losses, gifts of assets to charities $2,600 Net Income $16,770 Personal Allowances 0 Taxable Income $16,770 Tax Liability (10% of $16,770) $1,6770 Less Tax Credit On Dividends(5% of ($500) 5,000) Tax Payable $1,770 Assuming that Richardson Company is operated as a C corporation (with Tony Richardson (DD) as a 100% shareholder), determine the final corporate income tax liability of Richardson Co., the Richardson's final federal income tax liability any FICA taxes paid on Tony's compensation by Tony and by Richardson Company Gross profit (Income-Expenses) Dividends from 10% Owned Corporation Interest Gain on Sale of Depreciable property Installment on gain on sale of property Gross Income Operating Expenses Depreciation Amortization on property Dividends Received Taxable Income Regular Tax Liability (10% of $16,770) Less Tax Credit On Dividends(5% of 5,000) Tax Payable $18,730 $4,300 $400 $200 $1,200 $24,830 $15,000 $2,600 $16,770 4,000 $9,560 $9,560 $478 $478 Answer Summary S. Propr P'ship S Corp C Corp Corporate Income Taxes Paid NA NA NA $478 FICA Tax on TR - Paid by TR NA NA $1,770 $478 FICA Tax on TR - Paid by Company NA NA $70 $26 Unemp. Tax on TR - Paid by Company NA NA $86 $46 Self-Employment Tax Paid by TR $1,287 $896 NA NA Fed Inc Tax Paid by Richardsons $10,787 $6,400 $140 $28 $12,074 $7,296 $2,066 $1,056 Total Taxes 2. Prepare a tax memo and draft client letter indicating your recommendation to the Richardsons as to the preferred entity. Provide the appropriate tax citations and explain why you believe this method will be the best method. Your tax partner wants the material to be provided in an easy to read format for these clients. ANSWER 1