Tax liability

This is the total amount of tax that an entity or organization is under obligation to pay to the tax authority as a result of happening of a taxable event, using the appropriate tax rate.

Gross Income

The computation of the total taxable income begins with the calculation of the gross total taxable income. This includes all the income unless the law permits the exclusion of some specific income (Gibson, 2010)

For the case of Haltom’s, gross income;

Estimate of the Haltom’s Tax Liability with the Sale of the Bowling Alley (Amount in dollars)

Jared’s salary60000

Gross receipts from the day care39600

Sale of business 1200000

Total gross income1299600

Deductions for Adjusted Gross Income

Meals and snacks for the children 5,500

Substitute care paid out throughout the year 2,000

Various purchases for daycare, (toys, arts & crafts materials, and others.) 1,200

Home repairs 1,000

Insurance for business 300

Advertising, (mostly done with free ads on Craig’s list, and others.) 100

Cleaning supplies (shared business & personal) 350

Various certificate of primary education courses 400

Utilities (gas, electric, trash removal, and others. – shared) 2,000

Miscellaneous expenses (fire extinguisher, license, TB tests, and others.) 100

Less: Itemized Deductions or Standard Deductions

Computer1000 * 60/100600

Office furniture1500 * 60/100900

Home mortgage interest expense6,500

Property taxes1,100

Home owner’s insurance350

Charitable contributions (cash)1,000

Charitable contributions (non-cash, all substantiated)500

Tax preparation & consulting 475

Medical expenses – not reimbursed by insurance: 2,000

Less exemptions(3650)

Total deduction(30025)

Net taxable income1,269,575

Taxation

Over $373,650 $101,085.50 plus 35% of the excess over $373,650

Therefore; 1269575 – 373650 = 895925 * 35% = 313573.75 + 101085.50 = 414669.25 dollars

Estimate of the Haltom’s Tax Liability without the Sale of the Bowling Alley

Jared’s salary60000

Gross receipts from the day care39600

Total gross income99600

Deductions for Adjusted Gross Income

Meals and snacks for the children 5,500

Substitute care paid out throughout the year 2,000

Various purchases for daycare, (toys, arts & crafts materials, and others.) 1,200

Home repairs 1,000

Insurance for business 300

Advertising, (mostly done with free ads on Craig’s list, and others.) 100

Cleaning supplies (shared business & personal) 350

Various certificate of primary education courses 400

Utilities (gas, electric, trash removal, and others. – shared) 2,000

Miscellaneous expenses (fire extinguisher, license, TB tests, and others.) 100

Less: Itemized Deductions or Standard Deductions

Computer1000 * 60/100600

Office furniture1500 * 60/100900

Home mortgage interest expense6,500

Property taxes1,100

Home owner’s insurance350

Charitable contributions (cash)1,000

Charitable contributions (non-cash, all substantiated)500

Tax preparation & consulting 475

Medical expenses – not reimbursed by insurance: 2,000

Less exemptions(3650)

Total deduction(30025)

Net taxable income69575

Taxation

Over $68,000 but not over $137,300 $9,362.50 plus 25% of the excess over $68,000

Therefore;

69575 – 68000 = 1575 * 25% = 393.90 + 9362.50 = 9756.40 dollars.

(a) Allocation of the $1.2 million purchase price to each asset

The allocation of the purchase price to each asset is based on the original cost of the respective asset

For the equipments; it will be 700,000/(700,000 + 650,000 + 250,000) = 700,000/1,600,000 * 1,200,000 = 525,000 dollars

For the building; it will be 650,000/1,600,000 * 1,200,000 = 487500 dollars

For the land; it will be 250,000/1,600,000 * 1,200,000 = 187500 dollars

(b) Calculation of the overall gain on the sale of …
Posted by: Albertina Lebron

Share the joy
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •