The Principle Limited Partnership has more than 300 partners and is publicly traded. The Principle was grandfathered under the 1987 Tax Act and has consistently been taxed as a partnership. In the current year, The Principle Limited Partnership will continue to be very profitable and will continue to pay out about 30% of its income to its owners each year. The managing partners of The Principle
want to consider the firm's options for taxation in the current and later years.
What will be an ideal response?
What method should The Principle Limited Partnership choose to use to operate under the publicly traded partnership rules?
• Pay the annual 3.5% of gross income tax and continue to be taxed as a publicly traded partnership?
• Buy back enough interests (or restrict opportunities for trading) so that the partnership is no longer publicly traded?
• Incorporate the entity and be taxed as a regular (C) corporation?
The best alternative will be a function of the amount of gross income, amount of taxable income, tax rates of the partners, amount of profits the firm wants to retain, and costs of buying back partnership interests, and/or restricting trading, or incorporating.
If The Principle Limited Partnership chooses to continue as a partnership, should it elect to come under the electing large partnership rules?
• The election reduces the partnership's annual cost of providing information to partners but will require some start-up cost to make the change. The election also has the advantage of making it more difficult to accidentally terminate the partnership because of trades. However, the election significantly reduces the partners' reporting and audit options.
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Use the selected data from Pinecrest Company's financial statements to answer the following question. 2017 2016 Cash $ 22,000 $ 14,000 Accounts receivable 42,000 16,000 Merchandise inventory 22,000 83,000 Prepaid expenses 23,000 18,000 Total current assets $109,000 $131,000 Total current liabilities $ 65,000 $ 72,000 Net credit sales 221,000 326,000 Cost of goods sold 168,000 299,000 Net cash
flow from operating activities 16,000 29,000 Refer to the data for Pinecrest Company. Which of the following statements is true? a. Net income must be at least $36,000 for 2017. b. Net income must be less than $36,000 for 2017. c. Cash flows from operating activities is twice as large as net income for 2017. d. The amount of net income for 2017 cannot be determined based on the data provided.
Most management decisions are based on analyses using expected future dollars
Indicate whether the statement is true or false
Terry was told that as a leader he should be prepared to face “wicked organizational problems.” He should know that these types of problems are described as ______.
A. simple, straightforward B. complex, dynamic, and constrained C. highly certain D. limitless for application of analysis or heuristics
With respect to CO 2 emissions, how does India differ from the United States?
a. It has a higher level of CO 2 emissions. b. It has a faster rate of growth in CO 2 emissions. c. It has done more to adopt policies that will reduce CO 2 emissions. d. It is less reliant on coal than the United States.