JJB Corporation, an accrual basis taxpayer, has struggled to survive since its formation, six years ago. As a result, it has a deficit in accumulated E & P at the beginning of the year of $100,000. This year, however, JJB earned a significant profit; taxable income was $300,000 and its EP for the current year is $225,000. Consequently, JJB made one cash distribution (at year end) to Jeff, its sole shareholder: $350,000. What are the tax consequences to the shareholder and to the corporation?

 

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Joe has a ring weighing 20 grams made of an alloy of 19 % silver and the rest gold. He decides to melt down the rings and add enough silver to reduce the gold content to 73 %. How many grams of silver should he add?

 

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Joe Finance has just purchased a stock index fund, currently selling at $1200 per share.To protect against losses, Joe also purchased an at-the-money European put option on the fund for $60, with exercise price $1200, and three-month time to expiration. SallyCalm, Joe’s financial adviser, points out that Joe is spending a lot of money on the put.She notes that three-month puts with strike prices of $1170 cost only $45, and suggests that Joe use the cheaper put.a. Analyze Joe’s and Sally’s strategies by drawing the profit diagrams for the stock-plus-put positions for various values of the stock fund in three months.b. When does Sally’s strategy do better? When does it do worse?c. Which strategy entails greater systematic risk?

Profit/lossBreak even at 11401100 1200 1300 Share price 1220 Share price -60 PAYOFF FROM JOE’S STRATEGY Profit/lossBreak even at 11251100 1170 -45PAYOFF FROM SALLYS STRATEGY Market price($)…

 

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Joe and Kathy Graczak borrowed $132,000 for their son’s four-year college education. They must repay the loan at the end of 10 years. With 4.25% on parent PLUS loan, what is the maturity value Joe and Kathy must repay?

what would be the answer and how did you get it?

 

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As a manager at your company (the same one we used in Case 1), you think your company should be offering internships. With all the colleges in the Los Angeles area, you would have a large group of people who should be interested in an internship program. In addition, your company could use the extra help and creativity of about-to-graduate college students.

You recently read about Nickerson PME1, a 10-person Boston area marketing and public relations firm. Owner Lisa Nickerson offers a year-round internship program. She calls participants “associates” to make them feel less like “lowly interns” and more like members of the staff. Her interns receive course credit and work experience, but do not earn a paycheck. Instead, Nickerson teaches them to perform tasks like preparing press releases and promoting the company to clients. The arrangement results in valuable help around the office without draining the budget. Nickerson says, “If you take the time to put together a good program, you don’t have to pay the student. An abundance of students want that type of hands-on client experience.”

You believe that Los Angeles college students would be eager to gain experience at a real company, and fill in their résumés with solid work experience. The problem is that your boss resists internship programs because he has heard that interns are really employees who must be paid. He told you in a recent conversation that he is unsure of the fine line that separates employees from interns, and he doesn’t want to violate any labor laws.

Write a persuasive memo message to Dick Elders, Senior General Manager of your company. Explain to him how interns are different from employees. Use the Internet to research the topic, and learn what six requirements help the government determine whether an intern is a paid employee. Use persuasive strategies you have studied, but stay focused on the conviction that interns do not have to be paid as employees. You are on a first-name basis with Dick.

 

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