Homework Help Question & Answers

Your client, Bob, is the CEO of a corporation that has 12 stockholders who are also...

Your client, Bob, is the CEO of a corporation that has 12 stockholders who are also the only employees of the business. The corporation operates a boat dealership in Sherman, Texas. The corporation has accumulated earnings and profits of $3,000,000, not including the current year’s taxable income, which is expected to be $800,000. No dividends have been paid to stockholders. Bob has been very pleased with the corporation’s performance and he wants to reward the stockholders.

Bob is considering paying cash dividends of $10,000 per share or giving each employee a new boat that costs $10,000 and retails for $15,000.

In addition, when talking with Bob, you found that he has a corporate plane that he regularly uses for vacation and that he allows other corporate officers to use for vacation.

Should Bob consider paying a large year-end bonus to each employee instead of declaring dividends? Why or why not? Is there a tax issue that Bob needs to consider when loaning the corporate plane to stockholders for vacations? What actions can Bob take to minimize corporate tax while also providing rewards for stockholders?

0 0
Next > < Previous
ReportAnswer #1

Answer

1.

Yes,Bob consider paying a large year-end bonus to each employee instead of declaring dividends and also pay dividend plus bonus.Corporations at times make considerable earnings as a result of their annual operations.

Because bonus is allowed as expenditure by the federal tax laws.There is no tax issue in case of loaning for vacation.

2.

Following actions can Bob take to minimize corporate tax while also providing rewards for stockholders:

Incentive based pay

Make managers into owners (via paying salaries in stocks and stock options instead of cash)

Declare dividends every year

Allow bonus etc.

Know the answer?
Add Answer of:
Your client, Bob, is the CEO of a corporation that has 12 stockholders who are also...
Your Answer: Your Name: What's your source?
Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • You are currently working at a mid-sized certified public accounting firm. Your client is Bob Jones....

    You are currently working at a mid-sized certified public accounting firm. Your client is Bob Jones. Bob, age 60 and single, has recently retired from IBM. He has $690,000 available in his 401(k) fund and he is thinking of using that money to open a used car business that will be located at 210 Ocean View Drive in Pensacola, Florida. Bob has estimated that the business might make $300,000 in taxable income. Bob’s personal wealth including investments in land, stocks,...

  • You are currently working at a mid-sized certified public accounting firm. Your client is Bob Jones....

    You are currently working at a mid-sized certified public accounting firm. Your client is Bob Jones. Bob, age 60 and single, has recently retired from IBM. He has $690,000 available in his 401(k) fund and he is thinking of using that money to open a used car business that will be located at 210 Ocean View Drive in Pensacola, Florida. Bob has estimated that the business might make $300,000 in taxable income. Bob’s personal wealth including investments in land, stocks,...

  • [20] Bob, a calendar-year, cash-basis taxpayer, owns an insurance agency. Bob has four people selling insurance...

    [20] Bob, a calendar-year, cash-basis taxpayer, owns an insurance agency. Bob has four people selling insurance for him. The salesmen incur ordinary and necessary meal and entertainment expenses for which Bob reimburses them monthly. During the current year, Bob reimbursed his agents $10,000 for meals and $26,000 for entertainment. How much of the reimbursement can Bob deduct for meal and entertainment expenses on his current-year federal income tax return? A. $5,000 B. $8,000 C. $30,800 D. $36,000 [21] In January...

  • MERCHANDISING ACOUNTING Joe Blink opened Blink Corporation. It has link Corporation. It has issued 20,000 shares...

    MERCHANDISING ACOUNTING Joe Blink opened Blink Corporation. It has link Corporation. It has issued 20,000 shares of $4 par value common stock. It authorized 900,000 S od 900,000 share. The corporation is a merchandising business. Blink ventory system. Also Blink provides a 2-year warranty with one of its products which was first sold in October. Blink Corporation Trial Balance periodic inventory system September 30 Cr. Cash Dr. $ 54,000 14,000 Inventory Land 45,000 Plant Building 500,000 Accumulated Depreciation-plant Equipment 200,000...

  • MERCHANDISING ACOUNTING Joe B Joe Blink opened Blink Corporation. It has issued 20.000 shares of $4...

    MERCHANDISING ACOUNTING Joe B Joe Blink opened Blink Corporation. It has issued 20.000 shares of $4 par value common stock. Blink anplies the authorized 900,000 share. The corporation is a merchandising business. Blink appies" periodic inventory system. Also Blink provides a 2 vear warranty with one of its produce which was first sold in October. Blink Corporation Trial Balance September 30 Dr. Cash Inventory Land $ 54,000 14,000 45,000 500,000 Plant Building Accumulated Depreciation-plant 200,000 4,000 Equipment 12,000 Accumulated depreciation--equipment...

  • Problem: Rockford Corporation is a wholesale plumbing supply distributor. The corporation was organized in 1981, under...

    Problem: Rockford Corporation is a wholesale plumbing supply distributor. The corporation was organized in 1981, under the laws of the State of Illinois, with an authorized capitalization of 10,000 shares of no-par common stock with a stated value of $30 per share. The common stock is sold over the counter in the local area. You have been hired as of Friday, December 26, 2014, to replace the controller, who has resigned. As controller, you are responsible for the corporation’s accounting...

  • 48 mcq please help meeeeeeeeeeeeeeee

    1.Which of the following statements is CORRECT?a. If you add enough randomly selected stocks to a portfolio, you can completely eliminate all ofthe market risk from the portfolio.b. If you were restricted to investing in publicly traded common stocks, yet you wanted tominimize the riskiness of your portfolio as measured by its beta, then according to the CAPMtheory you should invest an equal amount of money in each stock in the market.That is, ifthere were 10,000 traded stocks in the...

  • Read the Article posted below, then answer the following questions, Please fully answer the following questions...

    Read the Article posted below, then answer the following questions, Please fully answer the following questions about the case. (1000 words all together if possible) (typed no pictures) 1) Present a general overview of the US Beverage Manufacturing & Bottling industry. Specifically, discuss major trends, competitors, their products and relative market share. 2) Perform a PESTEL analysis. This includes discussing the general environment factors affecting the beverage industry’s Performance such as economic, political/legal, socio-cultural, demographic, technological and global issues. 3)...

Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
Share Your Knowledge

Post an Article
Post an Answer
Post a Question with Answer

Self-promotion: Authors have the chance of a link back to their own personal blogs or social media profile pages.