I help with my questions. can some answer it by 5pm tomorrow?

NAME_________________________________________________ DATE ____________ 1. Explain some of the economic, social, and political considerations involved in changing the tax law. 2. Explain the difference between a Partnership, a Limited Liability Partnership (LLP) and a Limited Liability Company (LLC). In each structure who has liability? ` 3. How is \"control\" defined for purposes of Section 351 of the IRS Code? Internal Use Only 4. What are the advantages and disadvantages of using debt in a firm's capital structure? Companies use both debt and equity to finance their business activities, and the mix of debt and equity constitutes a business's capital structure. Companies choose between debt and equity depending on their current and expected future profitability. In general, the use of debt can put certain financial constraints on a business, but in exchange it allows greater returns for the company's current equity holders. The cost of debt often is cheaper than the cost of equity, but the use of debt can have a potentially negative effect on the overall future financing cost of a company. A major advantage to the use of debt is that debt helps generate and retain greater investment returns for a company's equity holders. A company may choose to use debt if it can afford making scheduled, fixed debt repayments, while expecting potential high growth in the future. Unlike equity financing that gives away a share of profits to new investors, the use of debt allows most of the profits to be retained within the company because debt holders are entitled to only the amount of interest agreed on. Moreover, the increased amount of capital from debt can generate additional returns for current equity holders. Borrowing costs from the use of debt usually are less expensive than those on equity financing, because debt holders enjoy greater guarantees about the safety of their investments than equity holders, thus bearing fewer investment risks. The lower cost of debt financing helps bring down the required rate of return on the capital project being financed, improving its profit margins. The use of debt also has a tax advantage compared to equity financing. Interest spent on debt borrowing is tax deductible, allowing for tax savings depending on a company's tax rate, while dividends paid out to equity holders must come from a company's after-tax income. The most common disadvantage to the use of debt is the financial distress that debt can exert on a company. Companies that have a high debt-to-equity ratio in their capital structure may see an increased risk in potential bankruptcy. Without enough equity as a cushion to absorb potential asset losses, declines in asset value can further spread into debt, prompting debt holders to seek court protection. The burden of making ongoing debt payments can also cause financial distress on a company. Failure to make scheduled payments may force a company into a default status. There often is a trade-off between obtaining inexpensive debt financing in the present and potentially sustaining higher financing costs in the future. Because the use of debt adds financial distress and increases the risk of potential bankruptcy for a company, future investors, both debt and equity investors, may require higher rates of return on their investments, increasing a company's financing costs. While companies should take advantage of debt financing, they should also use debt within their borrowing ability to avoid or reduce potential negative effects. Internal Use Only 5. Under what circumstances is a corporation's assumption of liabilities considered boot in a Section 351exchange? 6. What are the tax consequences for the transferor and transferee when property is transferred to a newly created corporation in an exchange qualifying as nontaxable under Section 351? 7. Why are corporations allowed a dividend-received deduction? What dividends qualify for this special deduction? Internal Use Only 8. Provide 3 examples of a Constructive Dividend. Are these Constructive Dividends taxable? 9. Discuss the tax consequences of a new Partnership Formation and give details to gain and losses and basis? 10. Provide 2 similarities and 2 differences when comparing Sections 351 and 721 of the IRS Code. Internal Use Only 11. What is the difference between inside and outside basis with a partnership? 12. ABC Partnership distributes $12,000 of taxable income to partner Bob and $24,000 of tax-exempt income to Partner Bob. As a result of these two distributions, how does Bob's basis change? 13. On January 1, Katie pays $2,000 for a 10% capital, profits, and loss interest in a partnership, which has recourse liabilities of $20,000. The partners share economic risk of loss from recourse liabilities in the same way they share partnership losses. In the same year, the partnership incurs losses of $6,000 and the recourse liabilities increase by $5,000. Katie and the partnership use a calendar tax year-end. What is Katie's basis at year-end? Internal Use Only 14. Stephen and Baily form an equal partnership. Stephen makes a cash contribution of $60,000 and a property contribution (adjusted basis of $120,000; fair market value of $130,000) in exchange for her interest in the partnership. Baily contributes property (adjusted basis of $11,000; fair market value of $250,000) in exchange for his partnership interest. What is Stephen and Bailey's basis in the new partnership? 15. Thomas and Richard formed the Happy Go Lucky Partnership four years ago. Because they decided the company needed some expertise in multimedia presentations, they offered Sarah a 1/3 interest in partnership capital and profits if she would come to work for the partnership. On July 1 of the current year, the unrestricted partnership interest (fair market value of $225,000) was transferred to Sarah. How should Sarah treat the receipt of the partnership interest in the current year? Remember that Sarah is just contributing her services! 16. Jimmy had investment land that he purchased in 1995 for $85,000. Two years ago, when the land was contributed to the FUN partnership, the FMV was $40,000. The land is inventory in the lands of the FUN partnership. The partnership then sells the land in the current year for $36,000. What is the partnership's recognized loss. Internal Use Only 17. Gabriella, a widow, has an extensive investment portfolio that has appreciated in value. Starting in 2012, she initiates a policy of making annual gifts of securities to her grandchildren who are attending college. Evaluate Gabriella's policy in terms of what she should do with regards to Federal Estate Tax and Gift Tax. 18. Harriet and Josh are husband and wife and have several adult children. Harriet has a net worth in excess of eight million dollars, while Josh's assets are negligible. Suggest several planning procedures that will maximize the use of estate exemption equivalents (i.e., bypass amounts) in transferring Harriet's wealth to the children under the following assumptions. Remember that the 2015 exemption for estate taxes is $5,250,000. 19. What is the Unified Tax Credit and how is it beneficial with wealth transfer? Internal Use Only 20. Samuel is considering the purchase of a $10,000,000 life insurance policy for the benefit of his 2 children if case anything happens to him. From an Estate Planning what is the best use of a Life Insurance Policy to minimize Estate Taxes? 21. Describe two types of trusts that can be used if a Grantor has charitable intent and wants to provide for that charity after death. 22. If grandmom gives you $14,000 in cash in 2014 so that she can use her annual exclusion, what are the tax consequences to you? Internal Use Only . . 23. Suzanne and Philip are married and have a 9-year old grandson, Basil. They want to contribute to a 529 plan on behalf of Basil's's education. For 2015, what is the maximum amount they can transfer to the plan without making a taxable gift? Assume Basil will be attending a 5 year university. 24. Melissa established a revocable trust with son Gilbert as remainder beneficiary. The value of assets was $80,000 when the trust was created and $12,500,000 when Melissa died. Based on these facts, what is included in Melissa's estate Internal Use Only 25. What advice would you give a wealthy family with 5 children and a prosperous family business so that they can do successful tax planning? Give me 5 planning ideas. 26. Clifford is an 80 year old wealthy business man who will probably live another 10 years. He has vast wealth including a 10 million home in Florida and $5mm worth of Apple common stock. He has a loving family including 3 children and 5 grandchildren and he is very much involved with with his charity work with the American Red Cross. What estate planning techniques would you recommend to him based on what we discussed in class? Internal Use Only Internal Use Only Internal Use Only