Tho16 Because Bob has had has land for over one year he is subject to be taxed

Tho16 because bob has had has land for over one year

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property, capital gains can be taxed at 0 percent, 15 percent, 20 percent, 25 percent or 28 percent. [Tho16] Because Bob has had has land for over one year, he is subject to be taxed at the maximum rate of 20 percent. Limited Liability Protection It would be best for the client to choose a business entity that has limited liability protections. This type of protection will guard its shareholders from personal liabilities of business claims and debts. For example, if Bob’s business has limited liability protection, in the event of an incident only the owner(s) involved who are responsible will face a lawsuit. But, if the entire business was being sued, then all the owners would be liable. Another example is if Bob’s business runs out of money and still has debts, the shareholders are not responsible to pay off those debts using their personal funds. Creditors are limited to the assets of the business and cannot pursue the personal assets of the partners. Tax Effect There are many tax effects that would potentially impact the clients tax return. S corporations have the advantage of avoiding double taxation compared to regular corporations. They do not pay federal taxes at the corporate level. S corporations report income on tax form
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Running head: Memorandum with Appendix       P a g e  |  6 1120S, and schedule k-1. While shareholders report individual income on Form 1040 and schedule E. Under 26 U.S. Code § 1363 - Effect of election on corporation, taxable income of an S corporation shall be computed in the same manner as in the case of an individual, except that— (1) the items described in section 1366(a)(1)(A) shall be separately stated, (2) the deductions referred to in section 703(a)(2) shall not be allowed to the corporation, (3) section 248 (expenditures with limitations) shall apply (4) section 291 shall apply if the S corporation (or any predecessor) was a C corporation for any of the 3 immediately preceding taxable years. Because this type of business entity is a pass-through entity, it’s important for the client to make sure all gains and losses from the business are reported correctly on his 1040 tax form. It also important to note that under 26 U.S. Code § 1366 - Pass-thru of items to shareholders, losses and deduction cannot exceed the shareholder basis in stock or debt of the business. Thank you, NAME
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Running head: Memorandum with Appendix       P a g e  |  7 Conclusion Economic Impact on The Client’s Personal Returns The economy can have a major impact on the client income tax returns. According to the tax policy center, high marginal tax rates can discourage work, saving, investment, and innovation, while specific tax preferences can affect the allocation of economic resources. According to Katzeff, the new U.S. tax code reform law contains seven federal income tax brackets. But a key change lowers most individual income tax rates. The top marginal rate drops to 37 percent from 39.6 percent. This will help Bob save more money on his federal income taxes. Bob might choose this entity over other entities because it offers more protection. In a sole
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