You Decide(Efficient Strategy For Recession Period

To: Date: From: Re: Mr. Jones 2/10/2012 xyz CPA tippy Overview Tax Issues CASE BACKGROUND: 1. Mr. Jones, a wealthy foliation node of the firm, has decided to lounge about a manufacturing familiarity, Smithon Widgets (a C jackpot) that has been very profitable. 2. This client, Mr. Jones, is the bulk shareholder of another C corporation, Johnson Services, which has incurred epoch-making losses. 3. Mr. Jones comes to you with some questions and suggested outcomes. a) I want to misdirect Smithon Manufacturing because it is very profitable. b) remedy now it has 30 shareholders but no single absolute majority shareholder. c) It is a C corporation with a fiscal shut of declination 1. d) In say for Mr. Jones to buy this lodge, he bequeath need to gift a lot of money in new manufacturing equipment, which meaning that Smithon will incur a loss for two years. e) Mr. Jones wants to buy the company effective January 1. f) Mr. Jones indicated that he treasured to buy th e company from the shareholders and convert it to an S corporation, in hunting lodge to offset Smithons profits with the losses from Johnson Services. g) Also, Mr. Jones wanted a fiscal year-end that is also a calendar year-end, i.e., December 31.

h) We should consider whether I could issue shares of shoot from Johnson Services which is a C corporation to the shareholders of Smithon in an exchange of shares. That way, the current Smithon owners would beat new shareholders (but not owners) of Johnson Services and I would get every(prenominal) their shares of Smithon. CASE abbreviation: 1. OUTRIGHT PURCHASE OF SMITHON S TOCK: 1a.) Should Mr. Jones purchases the st! ock of Smith outright, release Smithon intact? What about issuing debt in his Johnson Services company to pay for the Smith Company--would that raise debt to fair-mindedness issues? First I think its important to trace Mr. Jones intentions. 1. He wants to purchase Smithon Widgets, a , very profitable closely held C Corporation, it before long has 30 shareholders.. 2. He soon owns another C...

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