Chloe and Emma start a new business, Cement Sidewalks and Accessories (CSA), during the current…

Chloe and Emma start a new business, Cement Sidewalks and
Accessories (CSA), during the current year. CSA is organized as a partnership.
Chloe owns 40% of CSA; Emma owns the remaining 60%. Chloe and Emma come to your
firm for advice on the tax consequences of their business. Your supervisor
gives you the following information, as prepared by Chloe and Emma for their
first year of operation:

Sales                                 &
»

Chloe and Emma start a new business, Cement Sidewalks and
Accessories (CSA), during the current year. CSA is organized as a partnership.
Chloe owns 40% of CSA; Emma owns the remaining 60%. Chloe and Emma come to your
firm for advice on the tax consequences of their business. Your supervisor
gives you the following information, as prepared by Chloe and Emma for their
first year of operation:

Sales                                                                      $
210,000

Cost of materials                                                  (95,000)

Labor costs                                                             (90,000)

Other expenses                                                   (55,000)

Loss on sale of stock                                           (18,000)

Cash withdrawals by partners                        (70,000)

Loss                                                                       $(118,000)

Prepare a memo for your supervisor explaining the
ramifications of CSA’s first-year results for Chloe’s and Emma’s tax
liabilities.

»