Gloria Deal's Advanced_Tax_Corporate_Unit_2_Project

Gloria Deal's Advanced_Tax_Corporate_Unit_2_Project - C 2-1...

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C 2-1 Answer A new business can be conducted as a sole proprietorship, partnership, C corporation, S corporation, LLC, or LLP. Each form has tax and nontax advantages and disadvantages. See pages C: 2-2 through C: 2-7 for a listing of the tax advantages and disadvantages of each form. A comparison of the C corporation, S corporation, and partnership alternative business forms appears in Appendix F. pp. C: 2-2 through C: 2-8. Discussion Questions C 2-2 Answer Alice and Bill should consider forming a corporation and making an S corporation election. An S corporation election will permit the losses incurred during the first few years to be passed through to Alice and Bill and be used to offset income from other sources. The corporate form allows them limited liability. As an alternative to incorporating, Alice and Bill might consider a limited liability company that is taxed as a partnership. pp. C: 2-6 through C: 2-8. C 2-9 Answer Control requires the transferrers as a group to own at least 80% of the total combined voting power of all classes of stock entitled to vote and as least 80% of total number of shares of all other classes of stock. The nonvoting stock ownership is tasted on a class-by-class basis. pp.C:2-13 through C: 2-16. C 2-21 Answer Some of the advantages of using debt include: interest is deductible by the payer while a dividend payment is not deductible, and the repayment of an indebtedness generally is treated as a return of capital while a stock redemption generally is treated as a dividends-received deduction when received by a corporate shareholder; stock can be received tax-free as part of a corporate formation and/or
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Gloria Deal's Advanced_Tax_Corporate_Unit_2_Project - C 2-1...

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