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Running head: HAWAIIAN MEMORIES, INC 1

Hawaiian Memories, Inc

Student’s Name

Institutional Affiliation

HAWAIIAN MEMORIES, INC. 2

FROM:

TO:

RE:

Facts

Hawaiian Memories, Inc is a corporate taxpayer built up of partnership shareholder and

individual shareholders. The stakeholders include the initial corporations and their employees.

One of the shareholders, Inge is a Swedish, and therefore a foreign investor. The HMI has no

expectation of a significant investment increase for the next two years. However, there is an

expectation of a steady increase in investment in the organization after the two years. Bob and

Angie are also employed and receive salaries of $150000 a year. The organization also provides

the employees and stakeholders with accident and health insurances. A 10 percent of the

employee’s salaries are also contributed to employees’ pension plan. Angie and Bob who are the

initial incorporators of the company have just learned about cash-flow benefits of pass-through

losses and they now seek for an S selection so that the losses already incurred could be included

when considering taxes for the two years they are expecting more losses.

Issue and Conclusion

Can HMI request for the Selection be considered during the taxation? Will be the consideration

cover the benefits for both the previous and prospective losses for the two years? Will the

Selection request cover interests of the PSP Company, which is a shareholder in the HMI

Company?

Yes, the company will request through the initial incorporations will be given consideration.

HAWAIIAN MEMORIES, INC. 3

Yes, both the losses already incurred and those that are predicted by the company will both be

covered under this request. The tax calculations will make the carry-overs of the previous losses

following the fact that the request is valid and the two individuals deserve getting the benefits in

form of tax spreading as a result of the losses. The consideration is also valid because they had

no idea in the past and it is constitutionally allowed by the government of the country.

No, PSP is an independent party and thus a shareholder. Sharing the benefits to PSP will not be

direct, but rather through the HMI Company.

Analysis 1

When an individual, a partnership or a company makes a loss in a business, no tax should be paid

on the incomes made. This following the fact that the net income for the business is a negative

and thus a loss. The company has the right, covered by the Affordable Care Act of the in the

United States of America, advocating for fairness in taxation for the American business firms.

HMI Company has the rights to get protected from taxation of negative income on the

investment. According to this act, losses are carried forward t be used as benefits to the company

when it starts realizing positive income on the investments. In the case where the company has

already paid the taxes on income yet it is running a negative net income, the company involved

can be given the benefits through considering the losses for future calculation benefits. In the

case of PSP Company, the losses cannot be considered directly. This is following the fact that

there is no direct involvement in the taxation for this company. Moreover, the benefits are given

indirectly through HMI Company.

Issue and Conclusions

HAWAIIAN MEMORIES, INC. 4

What are the conditions that shall be used when giving the consideration to solving this case?

Will the compensation for the previous losses be given full credits? State why yes or no?

The major conditions that must be made include: must have less than 100 shareholders, must not

be Ineligible Corporation, must have only one class of stock and must be a domestic corporation

No, losses for the previous years are calculated to half. This means that the company will receive

benefits on just half the losses that they have incurred. For that of the expected losses, the

organization will get full credit advantage.

Analysis 2

Under Form 2553 Election by a Small Business Corporation, when a company requests for

Selection following losses that have been incurred, the organization must meet all the conditions

for their request to be termed valid. First, the organization must be domestic. The company must

also have less than one hundred stakeholders. HMI is qualified as the number of their

stakeholders does not reach the maximum number allocated. HMI Company can also receive the

benefits because they deal with just one category of stock, as well as an eligible corporation.

Based on the conditions, the company success is much likely to be approved as valid.

The credit for benefits on past losses will, however, be halved. This is in accordance to the states

by Form 2553 Election by a Small Business Corporation. For losses that shall be incurred, a full

benefit will be given and taxable incomes will be arrived at after subtracting all losses. The

reason for giving half benefits on losses that have already been incurred us because the previous

taxes paid are considered redundant, and therefore part of the liability is given to HMI

considering that it is partly their failure to be ignorant top include them In their the previous tax

filings.

HAWAIIAN MEMORIES, INC. 5

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