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AfilCa [17]
2 years ago
15

Steve owns Barb, Inc. and has grown the business over the last 15 years and is the sole owner. He decides to sell 40 percent of

the corporate stock (all outstanding stock) on July 1, Year 1 to an ESOP for $8 million. His adjusted basis for his entire interest in the stock was $3 million. On February 4th, Year 2, Steve uses all $8 million to buy shares of Apple Stock. Which of the following statements is correct? a. Steve will not have a capital gain in Year 1 for tax purposes. b. He will have a capital gain of $5.0 million in Year 1 for tax purposes. c. Steve's transaction does not qualify for non-recognition of gain treatment. d. He will have a capital gain of $6.8 million in Year 1 for tax purposes.
Business
1 answer:
Mamont248 [21]2 years ago
3 0

Answer:

a. Steve will not have a capital gain in Year 1 for tax purposes.

Explanation:

Since Steve (the owner of Barb) sold his stocks to an ESOP (employee stock ownership plan), then he will be able to avoid capital gains taxes at least for the first year. ESOPs are qualified retirement plans and when they invest in stocks of the same sponsoring company, the transaction is not taxed if the seller reinvests (buys other stocks). As long as ESOP holds at least 30% of the company's stocks, then Steve can defer his taxes.

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Answer:

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Explanation:

Contribution Margin is the difference between the revenue from sales and variable costs. This helps a company to analyze the profitability of individual products by calculating how earnings are influenced by sales. In other words, the contribution margin represents the portion of revenues that are used to cover fixed expenses such as administrative staff payments.

8 0
2 years ago
Miscavage Corporation has two divisions: the Beta Division and the Alpha Division. The Beta Division has sales of $580,000, vari
vesna_86 [32]

Answer:

Net income= -$34,200

Explanation:

Giving the following information:

Beta Division:

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Traceable fixed expenses of $186,500.

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Alpha Division:

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Traceable fixed expenses of $222,100.

Income= 109,400

The total amount of common fixed expenses not traceable to the individual divisions is $235,500.

<u>We need to deduct from the income of each division the not traceable fixed costs.</u>

Net income= 91,900 + 109,400 - 235,500

Net income= -$34,200

4 0
3 years ago
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Answer:

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7 0
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Explanation:

hope this helps you

7 0
3 years ago
Prepare general journal entries to record the following transactions for the Harris
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7 0
3 years ago
Read 2 more answers
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