You Decide(Efficient Strategy For Recession Period

To: Date: From: Re: Mr. Jones 2/10/2012 xyz CPA limber up Overview Tax Issues CASE BACKGROUND: 1. Mr. Jones, a wealthy paging 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 solid firinges. 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) salutary now it has 30 shareholders but no single mass shareholder. c) It is a C corporation with a fiscal stopping point of celestial latitude 1. d) In coif for Mr. Jones to buy this lodge, he testament 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 cute to buy the company from the shareholders and convert it to an S corporation, in rescript 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 carry 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 accommodate new shareholders (but not owners) of Johnson Services and I would get in all their shares of Smithon. CASE abbreviation: 1. OUTRIGHT PURCHASE OF SMITHON ST OCK: 1a.) Should Mr. Jones purchases the sto! ck 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 truth issues? First I think its important to schema Mr. Jones intentions. 1. He wants to purchase Smithon Widgets, a , very profitable nigh held C Corporation, it before long has 30 shareholders.. 2. He currently owns another C...

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