Which of the following options best describes the basis for conversion strategies?

Danny is trying to determine if he should purchase equipment of this business this year or next year. He is currently in the 28% tax bracket and will be able to expense the equipment in the year he purchases it. With the new equipment, he believes that his marginal rate will increase to 33% next year. The cost of the equipment is $20,000 and his after-tax rate of return is 6%. Calculate the after-tax cost of the equipment for both years and choose the correct statement below.

Índice Show

What is conversion strategy in tax?
Which of the following may limit the conversion strategy?
What are the two basic strategies that corporations use to minimize their tax burden quizlet?
Which of the following is a tax planning strategy that is often stopped by the assignment of income doctrine?

a. The after-tax cost of the equipment is $14,400 this year or $13,400 next year. Danny should purchase the equipment this year.
b. The after-tax cost of the equipment is $14,400 this year or $13,776 next year. Danny should purchase the equipment next year.
c. The after-tax cost of the equipment is $14,400 this year or $13,400 next year. Danny should purchase the equipment next year.
d. The after-tax cost of the equipment is $14,400 this year or $13,776 next year. Danny should purchase the equipment this year.

Present Year: $20,000 x 0.28 = 5,600; 20,000 - 5,600 = $14,400

Next Year: $20,000 x 0.33 = $6,600 x 0.943 (PV) = 6,224; 20,000 - 6,224 = $13,776

$14,400 > $13,776 --> Next year because it is cheaper

Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December, she received a $17,000 bill from her accountant for consulting services related to her small business. Reese can pay the $17,000 bill anytime before January 30 of next year without penalty. Assume Reese's marginal tax rate is 30 percent this year and will be 40 percent next year, and that she can earn an after-tax rate of return of 11 percent on her investments.

a. What is the after-tax cost if she pays the $17,000 bill in December?

b. What is the after-tax cost if she pays the $17,000 bill in January?

c. Based on requirement a and b, should Reese pay the $17,000 bill in December or January?

a. $11,900 (17,000 x 0.30 = 5,100; 17,000 - 5,100 = 11,900)

b. $10,873 (17,000 x 0.40 = 6,800; 6,800 x 0.901 = 6,127; 17,000 - 6,127 = 10,873)

c. January

a. $846,000 (940,000 x 0.10 = 94,000; 940,000 - 94,000 = 846,000)

b. $882,000 (900,000 x 0.02 = 18,000; 900,000 - 18,000 = 882,000)

c. Option 2

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Chapter 4: Knowledge Capture and Codification

Instructional Module

Multiple Choice Questions

1.Why is tacit knowledge capture so difficult?

a.Lack of well-documented methods and techniques.

b.Individuals often not motivated or wary of “losing” their valuable knowledge.

c.The volume of tacit knowledge greatly exceeds that of explicit knowledge.

d.Both a and b.

e.Both b and c.

2.Which knowledge capture technique is best suited for use with individual subject

matter experts?

a.Structured, one-on-one interviewing.

b.Facilitated workshop.

c.Automated log analysis of workstation data.

d.All of the above.

e.None of the above.

3.Which of the following statements are true?

a. Open-ended questioning is best suited to validating captured but not yet

codified knowledge.

b.Closed questioning results in questions that can be answered by a yes or a no.

c.Open questions place more constraints on the interviewee.

d.Closed questioning allow interviewers to observe the expert’s use of key

vocabulary, concepts and frames of reference.

e. All of the above.

4.Why does use of a case matrix make tacit knowledge capture easier?

a.Cases require open-ended questions only.

b.Cases are a more structured form of interviewing.

c.People like to recount their concrete experiences.

d.Both a and b.

e.Both a and c.

5.What are organizational stories?

a. A form of knowledge coding used with explicit knowledge.

b.A form of reflective listening that helps confirm that the expert’s message was

heard and understood correctly.

c.A chronology of all the important events that occurred during the lifetime of a

given organization that has been coded into the intranet.

d.A detailed narrative of management actions, employee interactions and other

intra-organizational events that are communicated informally within the

organization

What is conversion strategy in tax?

Tax conversion plans allow your qualified funds to be converted from fully taxable at distribution to fully tax-free at distribution. Moving qualified funds into a tax conversion plan eliminates account “equity market risk” on that portion of your qualified plan that is moved into the TCP.

Which of the following may limit the conversion strategy?

Answer and Explanation: Implicit taxes (option A) may limit a conversion strategy. A conversion strategy works on the basis that all income types and deduction are not treated in the same way.

What are the two basic strategies that corporations use to minimize their tax burden quizlet?

The two strategies are deferring taxable income and accelerating tax deductions. The intent of deferring taxable income recognition is to minimize the present value of taxes paid.

Which of the following is a tax planning strategy that is often stopped by the assignment of income doctrine?

The assignment of income doctrine requires income to be taxed to the taxpayer who actually earns it and most often limits the income shifting strategy.