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Document1 - Word Review View Help Search Е. Е. 2. Аавьсо Аавьсах АавьсАавьссс Аав Аавьсс 1 Normal 1 No Spac.. Heading 1 Heading 2 Title Subtitle Paragraph Styles 1. Paris Corporation holds a $100,000 unrealized net capital gain and a capital loss that will expire in the current year. Paris is subject to a 14 percent cost of capital. Its marginal tax rate is 40 percent. Should Paris accelerate the recognition of this gain from next year to this year, assuming a net capital loss carryforward in each of the following amounts? a $40,000 b. $10,000 c. Repeat parts a and b, assume that Paris is subject to a 6 percent cost of capital. OG

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Answer. Should paris accelerate the gain from next year to this net capital loss carry forward tollowing amount 52 recognition of this year, assuming a in each of the We have to select the alternatives that produces the lowest present value of the tax liability. Since the loss carry forward is in its last year, non acceleration of the gain by one year is at the cost of the entre Shelter of the cargover. a) If $40,000 carry forward : particulars Amount Accelerate gain : $24000 Net jain $60ooo x 464- tax rate * 1000 (p.v-factor) Do not accelerate. $35080 $ 100000 x you.4.877 $ 10,000 carry for word: particolars Amount Accelerate $36000 Net gain gain: $90,000 x 4010 tax rate & 1.00 cp.v. factor) Donot accelerate & 1 ooooo* 401-4.877 $35080

1 Repeating parts a and to assuming that paris is subject to a 6-10 cost of capital I140,000 carry forward : particulars Armount Accelerate Net gain gain : $60,000 x 4ol tax rate x6.00 pr. $24000 factor Donot accelerate : & 100doo x 401 - 4.943 $37720 It $10,000 carry forward: particulars Amount Accelerate gain : Net gain 190000 X 404 tax rate x 1.oo por factor Do not accelerate: $ 100000 x 404.* .943 $37720