30 May ACC 455 Week 2 Discussion Question Worksheet NEW
Week 2 – Discussion Questions Worksheet
1. Pers, Inc. incorporates on September 13, 2016 and begins operations on October 26 of the same year. What alternative tax years can Pers, Inc. elect to report its initial year’s income if it is a C-corp? Would make a difference if Pers, Inc. was to be a different type of entity? Please provide specific examples.
2. Lindel, Inc. currently uses a calendar year, but wants to change to a fiscal year ending on September 30th.
a) Assume Lindel is a C-corp owned by 85 shareholders, each owning 5% or less of the total stock. Can Lindel change its tax year? What steps does the company need to take in order to do so?
b) Assume Lindel is a S-corp owned by 100 shareholders, each owning 5% or less of the total stock. Can Lindel change its tax year? What steps does the company need to take in order to do so?
3. American Corporation incorporates on February 15 and begins business on August 12. The company elects its initial tax year end on October 31. The following are expenses for American Corporation: February 30 – Travel expenses to inspect potential business location, $1,200
March 2 – Payment to lawyer for incorporation, $5,300
March 5 – Legal fees for stock issuance, $1,200
May 20 – Salary payment to CEO, $5,000
September 1 – First rent payment, $3,000
Please classify each expense as either an organizational or start-up expenditure. Which expenses can be deducted during the first year ending October 31?
4. What is the difference in tax treatment for capital gains/ capital losses for a corporation vs. an individual? Which is more beneficial?
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