Corporate Income Taxes - Constructive Dividends, Redemptions, and

Essays on Corporate Income Taxes - Constructive Dividends, Redemptions, and Related Party Losses Research Paper Corporate Income Taxes Issues and Facts of unreasonable compensation, stock redemptions treated as dividends and related party losses. Closely held companies pay compensation to employees and shareholders, instead of paying dividends since compensation is deductible. The Internal Revenue Service Audit of a company will disallow a portion of compensation deduction on the basis that it was unreasonably excessive; thus treated as nondeductible dividend. The impact of this adjustment has not been of concern since dividends have been taxed to individuals at a rate of 15% versus compensation, which is taxed at a maximum of 35%. Besides, dividend distribution is not subject to employment taxes (Lassila Kilpatrick, 2008). The shareholders transfers common stock to the issuing company in exchange for property or money. The transaction is likely to be either the sale of stock to the outsider or the receipt by the shareholder of dividend from the company. The sale of stock by a shareholder to his/her company is taxed as dividends, instead of being taxed as sales. Some of the issues facing the Congress, courts and treasury over the years is the determination of which transfers of stocks are supposed to be classified as sales and which of them should to be treated as sales. But these parties do accept that transactions are treated as sales unless the transaction was equivalent to the distribution of taxable dividends. Taxes drive number decisions when it comes to owning rental properties. Therefore, landlords have a hard time in tax planning for rental properties. The largesse from the Treasury to the landlords does not have limits. After the deductions, IRS provides landlords with passive losses. Those which exceeds Rent received cannot be used in offsetting ordinary income like salaries. Tax Law and its Implications to Businesses The compensation of the taxpayer from the gross receipt of the business is against IRS laws and regulations on compensation. The taxpayer pays himself very high compensation to reduce the amount of net income of the business; thus reducing dividends distributed among shareholders. Therefore, excess compensation should be treated as dividends and should be taxed differently. Dividends do undergo double taxation since they are taxed at the company level as income and also when being distributed to shareholders as the share of profit. For tax planning purposes, the taxpayer should realize that dividends are taxed at the rate of 15%, compared to compensations, which are taxed at the rate 35% (Bankman, Griffith, Pratt, 2008). Therefore, it is even worse for the taxpayer to pay himself/herself high compensation on the basis of trying to reduce tax burdens. In fact, high compensation increases the tax burden on the taxpayer. The general view of section 162(a)(1) of the Internal Revenue Code as contained in IRS allows publicly traded firms to deduct an unlimited amount of executive compensation for corporate tax purposes because salaries of senior employees are always negotiated at an arm’s length by the profit-maximizing board. On the other hand, IRS uses section 162 (a) (1) to limit corporate deductions for the executive compensation paid by closely held companies because such companies lack enough finances to put in place checks and balances of publicly traded companies (Zelinsky, 2009). When family owned companies redeem shares, the purchase of those shares qualifies for capital gain treatment. Precisely, the sale of shares should be treated as the distribution of dividends to shareholders. The most important result of dividend treatment relates mostly to the difference in tax rates applied to dividends and the long-term capital gains. The long-term capital gains recognized by shareholders who sell shares held for more than one year are taxed at the rate of 20% (Brody Daiker, 2008). Therefore, the redemption of shares by the taxpayer and his son should be taxed at 20% federal rates since they have owned these shares for more than a year. Since there are some differences in the treatment of capital gains and dividends, the taxpayer should in future attempt to structure the corporate distribution as share redemption, other than treating it as dividends in order to reduce its tax burden. Solving the Problem and Communicating the Findings The problem of the unreasonable contribution can be solved by the taxpayer by reducing his level of compensation based on the current level of 5% on the gross receipt. The IRS will treat excess compensation as constructive dividends, which are taxed at the rate of 35%, other than the 15 % tax rate for compensation. As a result, the taxpayer would be forced to pay more taxes because of poor tax planning. In the case of stock redemptions in the construction company, taxes should be remitted at a rate of 20% on the redemption value as required by the federal tax laws. The rental loss from the construction company can neither be offset by tax liabilities for other companies of the taxpayer nor other income like the taxpayer’s salary (Hoffman, Raabe, Smith, Maloney, 2007). Therefore, based on the findings from unreasonable compensation, stock redemption, and rental losses, the client should accept Notice of the Proposed Amendment and adjust as per the requirement of the adjustments. This will relieve the taxpayer from future tax burdens resulting from failure to abide by the set federal tax laws. References Bankman, J., Griffith, T. D., Pratt, K. (2008). Federal Income Tax: Examples Explanations. London: Aspen Publishers Online. Brody, L., Daiker, S. B. (2008). The Insured Stock Purchase Agreement with Sample Forms. Washington D.C: American Bar Association. Hoffman, W., Raabe, W., Smith, J., Maloney, D. (2007). West Federal Taxation 2008: Corporations, Partnerships, Estates, and Trusts, Professional Edition. Stamford: Cengage Learning. Lassila, D. R., Kilpatrick, B. G. (2008). U.S. Master Compensation Tax Guide (2008). Illinois: CCH. Zelinsky, A. S. (2009). Taxing Unreasonable Compensation: Â § 162(a)(1) and Managerial Power. The Yale Law Journal, 637-645.

The Effects of Global Climate Change Free Essays

The Effects of Global Climate Change The humanity has made significant progress in all spheres of life. It is not an exaggeration to say that during the last century more inventions were made, than during the whole of history. Man flew into space, tamed atomic energy, found a way to cure many diseases that were considered incurable, and every new day is marked with a new breakthrough. We will write a custom essay sample on The Effects of Global Climate Change or any similar topic only for you Order Now However, there is a downside. For a long period of time people didn’t think about the consequences of their exponential development. Vast tracts of forests were cleared for agricultural purposes, thousands of tons of carbon dioxide dissolved in the atmosphere, hundreds of species on animals and plants become extinct every year. The rapid development of humanity renders a bad influence on Earth. One of the examples of these influence’s is climate change. It’s not a secret that a couple of hundreds of years ago the climate on Earth was colder than now. Many scientists warn about what is called global warming – a process of a constant increase of the annual temperature across the whole planet. For the first time its surge was recorded in the last quarter of the 20th century, and since that time the average temperature had increased by 0,7Â °?. The further one goes from the equator, the more obvious climate changes become. So what are the possible consequences of global warming? According to the recent reports of the United Nations, during the 21st century the average temperature will rise more than 1, 4-1, 8Â °? and will cause Arctic glaciers melt faster. The sea level will increase by 10 cm. It doesn’t seem to possess any danger, but in reality it will become a serious threat for those countries which are located not very high above the sea level. Some specialists predict that till the end of the current century the ocean will rise on the whole a meter. Netherlands, Great Britain, Japan, as well as the islands of Oceania and the Caribbean basin will be at risk. 30-40% of species and ecosystems will become extinct, because their habitat will change much faster than they adapt. If the temperature increases by one degree Celsius dramatic modifications to forests’ composition will occur. Some species have already begun to react to climate changes. For example, migratory birds start to fly away later in autumn and to come back much earlier in spring. Global warming will negatively affect precipitation maps. In arid regions, such as Central Asia, Australia, and Mediterranean, South Africa and so on, situation will become even more complicated due to the reduction of precipitation. At the same time, some regions may suffer from abnormal cyclones and the heavy rains that have become much more frequent. The recent hurricane in North America may be a demonstration of these processes. Such changes will have a bad effect on agriculture. Due to warming, it may improve in Northern Europe, but in Southern Europe, Africa and many regions of Asia high temperatures, droughts, floods and soil erosion will cause an irreparable damage. Specialists predict that yields in Africa and Asia will decrease, and Australia and New Zealand will face a great lack of drinking water. A risk of floods in Europe will increase, and the Eastern coast of the United States will undergo increased numbers of hurricanes and soil erosion. Besides, global warming will create a favorable environment for various diseases, so a dramatic growth of epidemics and pandemics can be expected. Scientists have discovered that Earth warms much faster than it did before, and there is convincing evidence that it is humanity who is responsible for that. At the moment research, which aim is to find solutions for this problem is being conducted. Every country should take action to prevent causing more damage to our planet, because the consequences will be serious for everyone. How to cite The Effects of Global Climate Change, Essay examples

Cause for Vegetarianism Essay Example For Students

Cause for Vegetarianism Essay Let American Consumer Counseling Help you Get Out of Debt! Cause for Vegetarianism Essay The choice of eating meat or not has been a debated issue for a continued number of years. There have long since been two sides: the proponents and opponents of meat consumption. More and more debates of its value and effect on the world have risen. Many claim it is wrong, while others think of it as a needed pleasure. Today, a greater percentage of the population eats meat. Only a few individuals seek the alternative route. Yet, there has been a steady rise in the number of vegetarians. Many may already know that religions all over the world have advocated a meat-free diet. While a few are lenient, the majority is steady. The reason a vegetarian diet has been preferred over meat dates back thousands of years. Take for example, the Christian tradition. Although most are now lenient, previously many great saints advocated a meat-free diet, for more reasons than one. In the beginning it was said by God, Here I have given you all vegetation bearing seed which is on the surface of the whole earthto you let it serve as food. (gen. 1.29) Later it was spoken by Jesus of the commandment, thou shall not kill. Jesus said, You heard that it was said to those of ancient times, Thou shall not kill; and whoever shall kill shall be in danger of the judgment.(Matthw.5.21) There is also the Hindu tradition, where a meatless way of life has gone on for thousands of years (until the invasion by foreign rule, forcing some to comply to foreign acts). This tradition has volumes of scriptures proclaiming vegetarianism. Take for example this quote from the Srimad Bhagavatam 1.7.37, A cruel and wretched person who maintains his existence at the cost of others lives deserves to be killed for his own eternal well-being, otherwise he will go down by his own actions. There are many more such quotes from scriptures all over the world. Yet nowadays, there is just the opposite of vegetarianism in compliance of these ancient texts. Although meat-eating has been denied to the human form by God and his sons and daughters of the past, people still adopt the process. Such are the statements of devout followers who adhere to a meat-free diet in accordance to scriptural texts. Those who advocate vegetarianism profess that many people are weak of heart and so succumb to meat eating. While those who advocate a meat-oriented diet say that a meat diet is essential for a normal and healthy life, for they provide protein. The Dutch chemist, Gerrit Jari Mulder, in his experiments, has proved in 1838, that protein is biologically essential, for every living creature needs a certain amount to survive. This fact about protein is due to the presence of amino acids, the building blocks of life. While it is true that animals provide essential protein for the human body, scientific reports have provided additional information that may seem to support a vegetarian viewpoint. In his Book Diet for Transcendence, Steven Rosen states from other sources that plants are the sources of protein and that animals are the secondary sources, having consumed such plants. Plants can synthesize amino acids from air, earth and water, but animals are dependent on plants for protein, either directly by eating plants or indirectly by eating an animal which has eaten and metabolized plants. There have also been many scientific reports of late showing the defects of a meat-oriented diet. Cancer and heart disease are nearly epidemic in nations with a high per capita consumption of meat, while they rarely occur in societies where little meat is consumed, quoted from Steven Rosens book Diet For Transcendence. Critiqe On Kirstie Laird EssayWith a variety of groups forming all over the world advocating vegetarianism, this issue will remain a top issue. .