Answer the following statements true (T) or false (F)
1. In evaluating whether to convert a current traditional IRA to a Roth IRA, a taxpayer will utilize the Deferred and Exempt Models.
2. In weighing whether to convert a traditional IRA to a Roth IRA, the expectation of lower tax rates at retirement is likely to bias the decision towards retaining the traditional IRA.
3. The source of funds used to pay the taxes upon conversion of a traditional IRA to a Roth IRA can influence the decision. Use of funds from the IRA to pay the conversion tax is likely to bias the decision towards converting.
4. Pass-through entities include partnerships, limited liability companies, limited liability partnerships, and C corporations.
5. A pass-through entity's primary characteristic is that income escapes taxation at the entity level and passes through to be taxed at the ownership level.
1. FALSE
The taxpayer will utilize the Retention and Conversion Models.
2. TRUE
Taxes at a higher rate will be paid at conversion as opposed to a lower tax rate in the future when the withdrawal is made at retirement.
3. FALSE
Paying from outside sources reduces the opportunity cost of converting to a Roth IRA.
4. FALSE
A C corporation is not a pass-through entity; it is a taxable entity. The S corporation is a pass-through entity.
5. TRUE
A pass-through entity escapes taxation because the owners pay the tax on entity income, but distributions are not taxed.
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What will be an ideal response?
Howard Co. uses the direct method to prepare its operating activities section of the statement of cash flows. Indicate how each event affects net income and the three types of activities on the statement of cash flows. In the net income column, use the letter "I" to indicate increase, the letter "D" to indicate decrease, and the letters "NA" to indicate that the income statement is not affected. In the three cash flow columns, use the letter "I" to indicate cash inflow, the letter "D" to indicate cash outflow, and the letters "NA" to indicate that the cash flow statement is not affected.Howard Co. issued 20,000 shares of common stock for $300,000 cash.
What will be an ideal response?