Dear Tutor, can you help me with the calculations for the attached tax case? This is a question you answered in April 21, 2013 for which you completed all the tax forms. I need all the pertaining cal
Dear Tutor, can you help me with the calculations for the attached tax case? This is a question you answered in April 21, 2013 for which you completed all the tax forms. I need all the pertaining calculations in excel to help me understand. Thank you.
Multiyear tax case
Susan owns a snowmobile manufacturing business, and Bruce owns a mountain bike
Because each business is seasonal, their manufacturing plants
are idle during their respective off-seasons.
Susan and Bruce have decided to consolidate
their businesses as one operation.
In so doing, they expect to increase their sales by 15%
annually and cut their costs initially by 30%.
Susan and Bruce own their businesses as
sole proprietors and provide the following summary of their 2011 taxable incomes:
Cost of goods sold
Business taxable income
Other taxable income
(net of allowable deductions)
2011 taxable income
Susan and Bruce don’t know what type of entity they should use for their combined
They would like to know the tax implications of forming a partnership versus a
Under either form, Susan will own 55% of the business and Bruce will own
They each require $70,000 from the business initially and would like to increase
that by $6,000 per year.
Based on the information provided, do a three-year projection of the income of the
business and the total taxes for a partnership and for a corporation.
In doing the
projections, assume that after the initial 30% decrease in total costs, their annual costs
will increase in proportion to sales.
Also, assume that their nonbusiness taxable income
Use the 2011 tax rate schedules to compute the tax for each year of
(page 98 in http://www.irs.gov/pub/irs-pdf/i1040gi.pdf)