6 You will receive form 1099 S which will report the proceeds that you received

6 you will receive form 1099 s which will report the

This preview shows page 11 - 17 out of 17 pages.

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. 11 | P a g e
Image of page 11
Final Project 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 12 | P a g e
Image of page 12
Final Project Appendix A Form 1040 PDF File – Attached 13 | P a g e
Image of page 13
Final Project Appendix B Schedule B - Attached 14 | P a g e
Image of page 14
Final Project Appendix C Form 8949 - Attached 15 | P a g e
Image of page 15
Final Project Appendix D Schedule D – Attached 16 | P a g e
Image of page 16
Final Project Appendix E Schedule E – Attached 17 | P a g e
Image of page 17

You've reached the end of your free preview.

Want to read all 17 pages?

  • Winter '15
  • rylandmahathey
  • Taxation in the United States, S corporation

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture