6 you will receive form 1099 s which will report the

pay LTCG taxes at the rate of 39.6%. You will receive form 1099-S which will report the
proceeds that you received for sale of the property. Therefore, the taxes on the gain are
$3,385,800. This will provide you with $5,164,200 to be used to use as start-up capital for your
used car dealership. Bob, you will use this to acquire or rent a building or location, as well as use
this money to purchase inventory, pay expenses in staring the business, as well as provide you
with a cash flow until the business operates making a profit. When calculating cash flow, we
want to add noncash charges to operating income after taxes. I believe you should have enough
cash flow for start-up costs, and also to operate without having to finance any of your business.
Salary or Cash Distribution: Bob, as we have discussed, you plan to work in the
business, alongside your daughter. Therefore, if you both will be required to take a salary, at
which time, federal and state income taxes will be deducted along with social security taxes. The
salary expense will reduce the income that will pass through to you and your daughter. Since
your classifying as an S corporation, you will not be required to pay self-employment taxes. The
IRS scrutinizes distributions and dividends passed to shareholders, therefore, you need to make
sure that you are not distributing greater than your salary, as the IRS will review your taxes
finding that you should have taken a larger salary, thereby, paying appropriate federal taxes.
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References
Hall, Aaron. IRS Tax Treatment of Installment Sales. (2016). Retrieved July 23, 2016.
Internal Revenue Code. 26 U.S. Code § 446. General Rule for Methods of Accounting. (2016).
Retrieved July 23, 2016.
Internal Revenue Code. 26 U.S. Code § 453. Installment method. (2016). Retrieved July 23, 2016.
Internal Revenue Code. 26 U.S.C. § 1001. Determination of Amount of and Recognition of Gain
or Loss. (2016). Retrieved on July 24, 2016.
Internal Revenue Code. 26 U.S. Code § 1366. Pass-thru of items to shareholders. (2016). Retrieved
July 24, 2016.
Kieso, Donald, E., Kimmel, Paul, D., & Weygandt, Jerry, J. (2015) Accounting Principles.
Hoboken: Wiley.
Rupert, T. J., Pope, T. R., & Anderson, K. E. (2016). Prentice Hall’s federal taxation 2016:
Individuals . Boston, MA: Pearson Education
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Appendix A
Form 1040 PDF File – Attached
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Appendix B
Schedule B - Attached
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Appendix C
Form 8949 - Attached
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Appendix D
Schedule D – Attached
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Appendix E
Schedule E – Attached
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