In 2020, Tom and Amanda Jackson (married filing jointly) have $228,000 of taxable income before considering the following events: (Use the dividends and capital gains tax rates and tax rate schedules.)

1. On May 12, 2020, they sold a painting (art) for $113,500 that was inherited from Grandma on July 23, 2018. The fair market value on the date of Grandma’s death was $91,750 and Grandma’s adjusted basis of the painting was $25,700.
2. They applied a long-term capital loss carryover from 2019 of $10,350.
3. They recognized a $12,175 loss on the 11/1/2020 sale of bonds (acquired on 5/12/2010).
4. They recognized a $4,210 gain on the 12/12/2020 sale of IBM stock (acquired on 2/5/2020).
5. They recognized a $17,840 gain on the 10/17/2020 sale of rental property (the only §1231 transaction), of which $8,560 is reportable as gain subject to the 25 percent maximum rate and the remaining $9,280 is subject to the 0/15/20 percent maximum rates (the property was acquired on 8/2/2014).
6. They recognized a $12,350 loss on the 12/20/2020 sale of bonds (acquired on 1/18/2020).
7. They recognized a $7,175 gain on the 6/27/2020 sale of BH stock (acquired on 7/30/2011).
8. They recognized an $11,350 loss on the 6/13/2020 sale of QuikCo stock (acquired on 3/20/2013).
9. They received $640 of qualified dividends on 7/15/2020.
   
   After completing the required capital gains netting procedures, what will be the Jacksons’ 2020 tax liability? (Do not round intermediate calculations.)

Please only provide feedback for this discussion:

One major conflict of interest for a board member is when the CEO of the company is on the board, in anyway, but especially as the chair of the board. This is a problem for the company and shareholders because the board determines the salary of the CEO. The board is also in place to make decisions that would be in the best interest of the company and the shareholders, not just for the CEO, who is more likely to be looking for a way to build the company in order to increase their own salary. This could be avoided by no allowing the CEO to sit on the board at all.

Another way that a board could act unethically is to buy up major shares in the company to keep a buyout from happening. Often the buyout is necessary for growth, but the board will act in a way to keep their jobs, salaries and benefits. It seems like this could be unavoidable, but shareholders should determine the amount of shares needed to accomplish a buy out.

LA 1.2

A conflict of interest is usually understood by all involved and can be found in rules or regulations set by a company, for example, it is a conflict of interest in the U.S. Government or Military to have a spouse in command of their spouse. Morale reasoning is individually based and can change depending on who has to evaluate the situation.

Consider the following scenario. Suppose that the free-trade price of a ton of steel is €500. Finland, a small country, imposes a €60-per-ton specific tariff on imported steel. With the tariff, Finland produces 300,000 tons of steel and consumes 600,000 tons of steel. As compared with free trade, steel production has risen by ½ while steel consumption fallen by 1/7.

(1) Draw a picture of Finland’s domestic market to illustrate this scenario. Please label all prices and quantities under free-trade and under the tariff.

(2). The tariff makes Finnish steel producers better off.

(3). The tariff makes Finnish steel consumers better off.

On April 1, 2020, Mendoza Company (a U.S.-based company) borrowed 514,000 euros for one year at an interest rate of 5 percent per annum. Mendoza must make its first interest payment on the loan on October 1, 2020, and will make a second interest payment on March 31, 2021, when the loan is repaid. Mendoza prepares U.S. dollar financial statements and has a December 31 year-end. Prepare all journal entries related to this foreign currency borrowing assuming the following exchange rates for 1 euro:

• 1 Record the borrowal of the foreign loan.

• 2 Record the first interest payment on the foreign loan.

• 3 Record the year-end interest accrual on the foreign loan.

• 4 Record the year-end adjustment to the foreign loan.

• 5 Record the second interest payment and foreign exchange gain or loss.

• 6 Record the repayment of the loan and foreign exchange gain or loss.

As at 1st January, 2017, the spot exchange rate between the U.S. dollar and Japanese Yen was trading at $1.00 equivalent to ¥100. The local bank offered the Company to exchange $1.00 for ¥102 on 31st December, 2017. The Interest rates on one year government bonds were 6% in U.S. and 10% in Japan. The company can borrow and lend at the risk-free rate on government bonds. As an Investment Advisor you have been approached for advice by the CEO on the most profitable option that he should take: Under option 1, he is contemplating borrowing in dollars on 1 st January, exchange for Yen, enter into a forward contract to exchange Yen for dollars in one year, and invest the Yen for one year. The second option entails borrowing in Yen on January 1, exchange for dollars, enter into a forward contract to exchange dollars for Yen in one year, and invest the dollars for one year. Required: With the help of detailed explanations and steps, advise the CEO on the most profitable option that the company must take.

For ten years, Illinois Tool Works (ITW) has followed an acquisition strategy where it focused on growing from 800 to 1,000 businesses, each of which sought to follow an 80/20 rule where 80% of revenues business came from 20% of its products or customers. In support of this strategy, ITW sent hundreds of managers for training to sharpen their negotiating and deal making skills. As a result, ITW bought 201 companies between 2004 and 2008. Indeed, new acquired companies added $1 billion a year to annual revenues totaling nearly $18 billion.

Now, however, company leaders believe they’ve focused too much on acquisition. Former CEO David Speer said, “I can buy a lot of companies and fix them, but are they something I want to own four or five years from now?” So ITW is switching to a divestiture strategy aimed at making the company stronger through subtraction rather than addition. Divesting, or selling companies or their parts, is often done to get rid of business units that no longer fit strategic plans. The goal is to raise cash, streamline operations, and focus on the remaining core businesses. Research ITW’s divesting strategy, summarize it, and explain its goals and tactics. Find out the latest developments from the last few years. Do you think the divesting strategy will work?

CEO Selections: John Kanas, Bob Nardelli, or Hank McKinnel

Background: A few years ago, companies such as AIG, who had a hand in the cause of the economic downturn that has devastated our economy, were planning to give or actually gave out huge golden parachutes to the same executives who led and approved of the companies actions.

Instructions: Please answer the questions below:

1) Perform a search of a CEO who has received a golden parachute.

1a) Who was the CEO?

1b) What was the company from where he or she received the golden parachute?

1c) What was the total compensation in the golden parachute?

1d) What happened to the company after the CEO's departure terms of before and after revenue?

1e) After the CEO's departure, did the former CEO obtain a leadership position at another firm? If yes, what company.

2) Based on your reading of Chapter 10 of your DLR e-text, do you believe the payment of these golden parachutes was ethical, right or wrong, and why? Please be substantive in your answers.

Notes:

1) Do not use Carl Icahn or Michael Corbat from Chapter 10 of your e-text, as examples of CEOs who have received golden parachutes.

2) DO NOT USE THE SAME CEO AS ANOTHER STUDENT! (Ignore)

3) Use academically credible sources.

4) Be sure to relate your post to Chapter 10 of your e-text and/or other credible source(s) with proper APA in-text citations and References listing. Failure to properly cite sources will result in a zero.

Make at least 250 words or more, thank you.

Accountability of Ex-HP CEO in Conflict of Interest Charges:

How could a CEO and chairperson of the board of directors of a major company resign in disgrace over a personal relationship with a contractor that led to a sexual harassment charge and involved a conflict of interest, a violation of the code of ethics? It happened to Mark Hurd on August 6, 2010. Hurd was the former CEO for HewlettPackard (HP) for five years and also served as the chair of the board of directors for four years. On departure from HP, Hurd said he had not lived up to his own standards regarding trust, respect, and integrity.

The board of directors of HP began an investigation of Hurd in response to a sexual harassment complaint by Jodie Fisher, a former contractor, who retained lawyer Gloria Allred to represent her. While HP did not find that the facts supported the complaint, they did reveal behavior that the board would not tolerate. Subsequent to Hurd’s resignation, a severance package was negotiated granting Hurd $12.2 million, COBRA benefits, and stock options, for a total package of somewhere between $40 and $50 million.

In a letter to employees of HP on August 6, interim CEO Cathie Lesjak outlined where Hurd violated the “Standards of Business Conduct” and the reasons for his departure. Lesjak wrote that Hurd “failed to maintain accurate expense reports, and misused company assets.” She indicated that each was a violation of the standards and “together they demonstrated a profound lack of judgment that significantly undermined Mark’s credibility and his ability to effectively lead HP.” The letter reminded employees that everyone was expected to adhere strictly to the standards in all business dealings and relationships and senior executives should set the highest standards for professional and personal conduct.

The woman who brought forward the sexual harassment complaint was a “marketing consultant” who was hired by HP for certain projects, but she was never an employee of HP. During the investigation, inaccurately documented expenses were found that were claimed to have been paid to the consultant for her services. Falsifying the use of company funds violated the HP Standards of Business Conduct.

As for the sexual harassment claim, Allred alleged in the letter that Hurd harassed Fisher at meetings and dinners over a several year period during which time Fisher experienced a number of unwelcome sexual advances from Hurd including kissing and grabbing. Fisher said that this continual sexual harassment made her uncertain about her employment status.

In August 2013, HP and former CEO, Mark Hurd, won dismissal of a lawsuit that challenged the computer maker’s public commitment to ethics at a time when Hurd was allegedly engaging in sexual harassment.

HP did not violate securities laws despite making statements such as a commitment to be “open, honest, and direct in all our dealings” because such statements were too vague and general, U.S. District Judge Jon Tigar in San Francisco wrote.

As a result, shareholders led by a New York City union pension fund could not pursue fraud claims over Hurd’s alleged violations of HP’s standards of business conduct, the judge ruled.

“Adoption of the plaintiff’s argument (would) render every code of ethics materially misleading whenever an executive commits an ethical violation following a scandal,” Tigar wrote.

Shareholders led by the Cement & Concrete Workers District Council Pension Fund of Flushing, New York, claimed in their lawsuit that the share price had been fraudulently inflated because of Hurd’s alleged activities.

They also claimed that HP’s statements about its rules of conduct implied that Hurd was in compliance, and that Hurd ignored his duty to disclose violations.

At most, Tigar said, such statements “constitute puffery—if the market was even aware of them.”

Tigar also said Hurd’s alleged desire to keep his dealings with Fisher secret did not by itself give rise to a fraud claim.

“Nothing suggests that Hurd thought that he could mislead investors with the statements the court finds were immaterial,” the judge wrote.

Questions:

1. When he was CEO, Hurd wrote in the Standards of Business Conduct at HP that “We want to be a company known for its ethical leadership….” His message in the preface continued: “Let us commit together, as individuals and as a company, to build trust in everything we do by living our values and conducting business consistent with the high ethical standards embodied within our SBC.”

What is the role of trust in business? How does trust relate to stakeholder interests? How does trust engender ethical leadership? Evaluate Mark Hurd’s actions in this case from an ethical and professional perspective.

2. Despite hundreds of pages of policies, codes of ethics, organizational values, and carefully defined work environments and company culture, lapses in workplace ethics occur every day. Explain why you think these lapses occur and what steps might be taken by an organization to ensure that its top executives live up to values it espouses.

3. Leo Apotheker, the former CEO of HP who succeeded Mark Hurd, resigned in September 2011, after just 11 months on the job—but he left with a $13.2 million severance package. Hurd left with a package between $40 million and $50 million. Do you think executives who resign from their positions or are fired because of unethical actions should be forced to give back some of those amounts to the shareholders to make them whole? Why or why not?

On November 20, 2012, Hewlett-Packard (HP) disclosed that it discovered an accounting fraud and has written down $8.8 billion of the value of Autonomy, the British software company that it bought in 2011 for $11.1 billion, after discovering that Autonomy misrepresented its finances. In May 2012, HP had fired former Autonomy CEO, Dr. Michael Lynch, citing poor performance by his unit.

Provide a brief discussion of the auditor liabilities and the potential defenses.

What duties of care, laws, or responsibilities to clients were violated?

What are the potential defenses available to the accountants and auditors involved in the situation?