Question 1
TAX PROBLEM #4, FALL 2013 PART 1. John and Sarah Smyth are married and wish to file a joint return for 2013. They have one dependent child, Jack (age 14), who lives with them. Their primary residence is in Phoenix, and they own a condo (2nd home) in Flagstaff. John and Sarah have the following items of income and expense for 2013: Income: John?s salary $135,000 Sarah?s salary 100,000 Interest income on City of Mesa bonds 2,000 Interest income on US Treasury bonds 10,000 Qualified cash dividends 10,000 Regular (nonqualified) cash dividends 1,000 FMV of 50 shares of AB Co. common stock received as a stock dividend 12,500 Refund of 2012 Arizona income tax (the Smyths itemized in 2012) 4,000 Net rental income from 100% owned rental house 8,000 Share of Brown Partnership loss* (10,000) Share of Purple S Corporation income** 60,000 Life insurance proceeds received on the death of John?s father 100,000 Short-term capital gains 12,000 Short-term capital losses (16,000) 28% Long-term capital gains 10,000 15% Long-term capital gains 40,000 15% Long-term capital losses (5,000) Expenses: Home mortgage interest ($500,000 principal) 30,000 Home equity loan interest ($110,000 principal) 7,700 Condo loan interest ($150,000 principal) 12,000 Car loan interest 7,000 Credit card finance charges 3,000 Home property taxes 15,000 Condo property taxes 4,000 Condo maintenance fees 3,000 Car tags (ad valorem part) 2,500 Arizona income tax withheld 16,000 Arizona sales tax paid 8,000 Federal income taxes withheld 50,000 Medical insurance premiums (not part of an employer plan) 10,000 Unreimbursed medical bills 6,000 Charitable contributions 12,000 Unreimbursed employee business expenses 8,000 * John and Sarah invested $6,000 as limited partners in the Brown Partnership at the beginning of 2013. The loss is not the result of real estate rentals. Neither materially participate in the operations of the partnership.. ** Sarah is a 50% owner and President of Purple. REQUIRED: Determine John and Sarah?s tax liability, using the tax formula. You must label your work, provide supporting schedules for summary computations, and indicate any carryovers. Present your work in a neat, orderly fashion. PART 2. Jack owns a mutual fund, which paid $2,500 in regular (nonqualified) dividends in 2013. Jack also earned $700 from mowing lawns during the year. REQUIRED: Determine Jack? tax liability, using the tax formula. Label all work.
Question 2
1,Suppose the interest rate on a 1-year T-bond is 3.0% and that on a 2-year T-bond is 5.0%. Assume that the pure expectations theory is NOT valid, and the MRP is zero for a 1-year T-bond but 0.2% for a 2-year bond. What is the equilibrium market forecast for 1-year rates 1 year from now? 2. Silver Streak Inc. has a bond outstanding with 15 years to maturity, a 7% coupon paid semiannually, and a $1,000 par value. The bond has a 6% nominal yield to maturity, but it can be called in 5 years at a price of $1,035. What is the bond?s nominal yield to call? 3.A 25-year, $1,000 par value bond has an 8.5% annual payment coupon. The bond currently sells for $925. If the yield to maturity remains at its current rate, what will the price be 5 years from now? 4.Tidy Co. bonds currently sell for $1,150. They have a 6.35% annual coupon rate and a 20-year maturity, but they can be called in 5 years at $1,067.50. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. Under these conditions, what rate of return should an investor expect to earn if he or she purchases these bonds? 5. Blue Moon Corporation's 5-year bonds yield 6.20% and 5-year T-bonds yield 4.40%. The real risk-free rate is r* = 2.5%, the inflation premium for 5-year bonds is IP = 1.50%, the liquidity premium for Blue Moon bonds is LP = 0.5% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t ? 1) ? 0.1%, where t = number of years to maturity. What is the default risk premium (DRP) on Blue Moons' bonds? 6. Sorell's outstanding bonds have a $1,000 par value, and they mature in 25 years. Their nominal yield to maturity is 9.25%, they pay interest semiannually, and they sell at a price of $975. What is the bond's nominal coupon rate?
Question 3
5(a) Steve purchased 5,000 shares of Apple Corporation stock at $10 per share. Two years later, he receives a 5% common stock dividend. At that time, the common stock of Apple Corporation had a fair market value of $12.50 per share. What is the total basis of the Apple Corporation stock, the per share basis, and gain recognized upon receipt of the common stock dividend? a. $50,000 basis in stock, $10 basis per share for the original stock and $0 basis per share for the dividend shares, $0 recognized gain. b. $50,000 basis in stock, $9.52 basis per share, $0 recognized gain. c. $53,125 basis in stock, $10 basis per share for the original stock and $12.50 basis per share for the dividend shares, $3,125 recognized gain. d. $53,125 basis in stock, $10.12 basis per share, $3,125 recognized gain. e. None of the above. 5(b) Jenny received nontaxable stock rights on June 9, 2009. She allocated $3,800 of the $20,000 basis for the associated stock to the stock rights. The stock rights are exercised on October 12, 2009. The exercise price for the stock is $11,000. What is the taxpayer's basis for the acquired stock? a. $0. b. $7,200. c. $11,000. d. $14,800. e. None of the above. 5(c) Cynthia gives her son stock with a basis in her hands of $65,000 and a fair market value of $60,000. No gift tax is paid. Son subsequently sells the stock for $63,000. What is his recognized gain or loss? a. $0. b. $2,000 Loss c. $3,000 Gain d. $63,000 Gain e. None of the above. 5(d) On July 10, 2009, Bruce purchased an option to buy 1,000 shares of Omni, Inc. at $30 per share. He purchased the option for $2,000. It was to remain in effect for five months. The market experienced a decline during the latter part of the year, so Bruce decided to let the option lapse as of December 1, 2009. On his 2009 tax return, what should Bruce report? a. A $2,000 long-term capital loss. b. A $2,000 short-term capital loss. c. A $2,000 ? 1231 loss. d. A $2,000 ordinary loss. e. None of the above.
Question 4
Need help with the attached: On December 31, 2008, Ramey Associates owned the following securities, held as a long-term investment. The securities are not held for influence or control of the investee. (Common Stock, Shares, Cost) Hurst Co. 2,000 $60,000 Pine Co. 5,000 45,000 Scott Co. 1,500 30,000 On December 31, 2008, the total fair value of the securities was equal to its cost. In 2009, the following transactions occurred. July 1 Received $1 per share semiannual cash dividend on Pine Co. common stock. Aug. 1 Received $0.50 per share cash dividend on Hurst Co. common stock. Sept. 1 Sold 1,500 shares of Pine Co. common stock for cash at $8 per share, less brokerage fees of $300. Oct. 1 Sold 800 shares of Hurst Co. common stock for cash at $33 per share, less brokerage fees of $500. Nov. 1 Received $1 per share cash dividend on Scott Co. common stock. Dec. 15 Received $0.50 per share cash dividend on Hurst Co. common stock. Dec. 31 Received $1 per share semiannual cash dividend on Pine Co. common stock. At December 31, the fair values per share of the common stocks were: Hurst Co. $32, Pine Co. $8, and Scott Co. $18.
Question 5
"There is no word limit, found no such journal article in the syllabus and I choose "outsourcing." Thanks "Submit a paper on one of the major topics listed below using one of the recommended journal articles found in the syllabus as the basis for the paper and incorporating at least two other related articles of the student?s choice: Outsourcing The paper must (a) identify the main issues in the chosen area, (b) apply and reference new learning that has occurred, (c) build upon class activities or incidents that facilitated learning and understanding, and (d) present specific current and/or future applications and relevance to the workplace. The emphasis of the paper should be on application of new learning. Writing the Final Project Paper The Paper: Must be eight- double-spaced pages in length and formatted according to APA style as outlined in the approved APA style guide. Papers with more or less than eight pages in length will have two points deducted from the final score for each page over or under, exclusive of Appendix, References, Exhibits, etc. Must include a cover page that includes: Name of paper Student?s name Course name and number Instructor?s name Date submitted Must include an introductory paragraph with a succinct thesis statement. Must address the topic of the paper with critical thought. Must conclude with a restatement of the thesis and a conclusion paragraph. Must use APA style as outlined in the approved APA style guide to document all sources. Must include, on the final page, a Reference List that is completed according to APA style as outlined in the approved APA style guide. ""
