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Zarrin [17]
3 years ago
11

Sara owns 160 acres of farmland worth $800,000. She inherited the land from her father 30 years ago when it was worth $200,000.

Her married son would like to buy the land, but has limited funds. He proposes buying the land on a contract for deed, paying $50,000 down and the balance over 20 years at 4% interest. Assume that if Sara sold the land for cash, her tax rate on the gain would be 23.8%, but if she sold it on a contract her rate would be 15% on the gain and 28% on the interest income on each payment. Advise Sara on how much tax she would have to pay under each option (selling for cash or on the contract, also assume Sara could earn 4% interest if she sold for cash and invested the money)
Business
1 answer:
frez [133]3 years ago
7 0

Answer:

Check the following calculations

Explanation:

Sara with selling option

Selling Price = 800000

acquisition cost = 200000

Capital gain =  600000

  • Intersest earned on 800000 @ 4% for 20 Years = 800000 * CVF @ 4% 20 Years

800000* 1.464 = 1171200 - 800000 = 371200

  • Tax on interest Income = 371200 * 28% = 103936

  • Tax on capital Gain = 600000*23.8% = 142800

  • Total Tax on selling of land = 103936 + 142800 = 246736

  • On the contract

Capital gain = 600000

Intersest earned on [email protected]% for 20 Years = 750000 * [email protected]% 20 Years

750000* 1.464 = 1098000 - 750000 = 348000

  • Tax on interest Income = 348000 * 28% = 97440

  • Tax on capital gain = 600000*15%= 90000

total Tax on contract = 97400+ 90000 = 187440

Saving of tax on contracting = tax on sale - tax on contract = 246736 - 187440 = 59296

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State the effect (cash receipt or payment and amount) of each of the following transactions, considered individually, on cash fl
Rudiy27

Answer:

A. Effect=CASH PAYMENT

Amount=$411,000

B. Effect=CASH RECEIPT

Amount=$440,000

C. Effect= CASH RECEIPT

Amount=$60,000

D. Effect= CASH PAYMENT

Amount=$650,000

E. Effect= CASH PAYMENT

Amount=$50,000

F.Effect=CASH RECEIPT

Amount=$490,000

G. Effect= CASH PAYMENT

Amount=$400,000

H. Effect=CASH PAYMENT

Amount=$1,320,000

Explanation:

Calculation to State the effect of cash receipt or payment and the amount

A. Based on the information given the effect will be CASH PAYMENT of the amount of $411,000

Effect= CASH PAYMENT

Amount=$411,000

B. Based on the information given the effect will be CASH RECEIPT of the amount of $440,000(20,000*$22))

Effect= CASH RECEIPT

Amount= $440,000

(20,000*$22)

C. Based on the information given the effect will be CASH RECEIPT of the amount of $60,000

Effect=CASH RECEIPT

Amount=$60,000

D. Based on the information given the effect will be CASH PAYMENT of the amount of $650,000

Effect=CASH PAYMENT

Amount= $650,000

E. Based on the information given the effect will be CASH PAYMENT of the amount of $50,000

Effect=CASH PAYMENT

Amount=$50,000

F. Based on the information given the effect will be CASH RECEIPT of the amount of $490,000 (98%*$500,000)

Effect=CASH RECEIPT

Amount=$490,000

(98%*$500,000)

G. Based on the information given the effect will be CASH PAYMENT of the amount of $400,000 (10,000*$40)

Effect=CASH PAYMENT

Amount=$400,000

(10,000*$40)

H. Based on the information given the effect will be CASH PAYMENT of the amount of $1,320,000 (1,000,0000*$1.50)-(120,000*$1.50)]

Effect= CASH PAYMENT

Amount=$1,320,000

[(1,000,0000*$1.50)-(120,000*$1.50)]

=$1,500,000-$180,000

=$1,320,000

8 0
2 years ago
If the labor force is 320,000 and the total population 16 years of age or older is 400,000, the labor-force participation rate i
Anon25 [30]

Answer:

80 %

Explanation:

Given that,

Labor force = Employed people + Unemployed people

                    = 320,000

Total population 16 years of age or older = 400,000

Therefore, the labor force participation rate is as follows:

= (Labor force ÷ Population of 16 years of age or older) × 100

= (320,000 ÷ 400,000) × 100

= 80 %

6 0
3 years ago
XYZ Corp owns a 3-year $10 million par floating rate bond. The coupons on the bond are 12-month LIBOR. XYZ would like to hedge a
malfutka [58]

Answer:

 2.45%

Explanation:

The computation of the fixed rate is shown below:

Years to maturity   Zero coupon  bond price  YTM      Forward rate

1                                 0.99                     1.01%  

2                                      0.97                             1.53%       2.06%

3                                      0.93                            2.45%     4.30%

The fixed rate should be equivalent to the YTM of the 3 year bond i.e. 2.45% the same is to be considered

3 0
3 years ago
Production costs chargeable to the Finishing Department in May at Kim Company are materials $7,700, labor $19,700, overhead $18,
kenny6666 [7]

Answer and Explanation:

The computation of the unit cost for material and conversion cost is shown below:

Material Cost per Unit is

= Total Material Cost ÷  Equivalent Units for Materials

,= ($7,700 +  $66,801) ÷ (20,300 units)

= $3.67 per unit

And, the conversion cost per unit is

= (labor cost + overhead cost) ÷ equivalent units for conversion

= ($19,700 + $18,289) ÷ 18,900 units

= $2.01 per unit

5 0
3 years ago
Why are people engaged in business? Explain.​
Crank

Answer:

The reason why people get engaged in business is because they become more productive and people engage in business to make money and get returns on investment.

Explanation: This is the answer I hope this helped you out.

3 0
2 years ago
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