Business, 22.09.2019 16:30 maddi4753

Western bank & trust purchased land and a building for the lump sum of $3 million dollars. to get the maximum tax deduction, western allocated 90% of the purchase price to the building and only 10% to the land. a more realistic allocation would have been 70% to the building and 30% to the land.
explain the tax advantage of allocating too much to the building and too little to the land.
was western's allocation ethical? if so, state why. if not, state why not. identify who was harmed.

Answers: 2

Show answers

Answers

Answer from: rihanna79

Explanation:

Because land never depreciates, Western Bank & Trust wanted to distribute a higher percentage of the purchase price to the building, rather than the land. By allocating 90% of the purchase price to the building, rather than a more accurate 70%, Western Bank & Trust increases the depreciation amount of the building each year. For tax purposes, the IRS requires that the Modified Accelerated Cost Recovery System (MACRS) be used as the depreciation method used by companies. Under this method, the IRS specifies the useful life for a specific asset. MACRS also ignores residual value of an asset at the end of its useful life. By stating that the building was worth 90% of the total purchase price, Western Bank is attempting to increase its tax deduction from the IRS, because only the building depreciates, not the land. This improper allocation of the total purchase amount violates GAAP principles, which require that accounting information be “relevant and have faithful representation.” The information must be “complete, neutral, and free from error” (Nobles, Mattison, & Matsumura, 2014). For Western Bank to provide complete, neutral, and free from error information, it should record the transaction honestly: 70% to the building, 30% to the land. This dishonest representation is harmful to the federal government in that it is allowing Western Bank to take more money than what it is owed. If these kinds of situations happen on a large scale, it could have a huge impact on the economy in general. Source: Nobles, T., Mattison, B., & Matsumura, E. M. (2014). Horngren's Accounting, 10th Edition. Pearson Education, Inc. Student 2

Answer from: Quest

answer; by looking at total product,marginal product,and changes in both after changes in inputs

Answer from: Quest

Answerless than average total cost, regardless of whether marginal cost is rising or falling;

Another question on Business

Business, 22.06.2019 08:00

In addition to using the icons to adjust page margins, a user can also use

Answers: 1

Answer

Business, 22.06.2019 09:30

The 39 percent and 38 percent tax rates both represent what is called a tax "bubble." suppose the government wanted to lower the upper threshold of the 39 percent marginal tax bracket from $335,000 to $208,000. what would the new 39 percent bubble rate have to be? (do not round intermediate calculations. enter your answer as a percent rounded to 2 decimal places,e.g., 32.16.)

Answers: 3

Answer

Business, 22.06.2019 12:50

Kendrick is leaving his current position at a company, and charlize is taking over. kendrick set up his powerpoint for easy access for himself. charlize needs to work in the program that is easy for her to use. charlize should reset advanced options

Answers: 3

Answer

Business, 22.06.2019 13:40

The cook corporation has two divisions--east and west. the divisions have the following revenues and expenses: east west sales $ 603,000 $ 506,000 variable costs 231,000 300,000 traceable fixed costs 151,500 192,000 allocated common corporate costs 128,600 156,000 net operating income (loss) $ 91,900 $ (142,000 ) the management of cook is considering the elimination of the west division. if the west division were eliminated, its traceable fixed costs could be avoided. total common corporate costs would be unaffected by this decision. given these data, the elimination of the west division would result in an overall company net operating income (loss)

Answers: 1

Answer

You know the right answer?

Western bank & trust purchased land and a building for the lump sum of $3 million dollars. to g...

Questions

Engineering, 08.04.2020 03:15

A machine component is subjected to an axial load that varies from 3000 lb compression to 5000 lb tension. Determine the combination of maximum and mi...