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, and bonds is about $14,000,000. He reported an interest income of $20,000 and dividend income of $6,000 last year. The $14,000,000 includes land worth $9,000,000 that Bob bought in 1966 for $450,000. Bob has hired your firm for professional advice regarding whether he should operate as a sole proprietor, a partnership, an S corporation, or a C corporation. He is also considering transferring a possible 40% interest in his new business to his daughter Mandy, age 23 and single.
Calculate the property disposition capital gains and taxation of gross income.
The dividend is a kind of return that is paid by the company to the shareholders and this is a reward that is paid for taking a risk. Distribution of dividends will be held in the annual general meeting.
Answer and Explanation:
|Bob is 60 and single|
|Cash available = 690000$|
|Taxable income= 300000$|
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from Finance 101: Principles of FinanceChapter 16 / Lesson 2