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... to get established in, in doing so weakening the host countries producers. Once the US producers in this case are removed, foreign competitors might raise their prices again. 4. Estate and Gift Tax Case: Adviser to the president of Georgia Perimeter College. A wealthy Alumnus buys, and then gives a plot of land to the school for the use of a new recreation facility.
Whats the cost of using the land as a recreation facility? This case is eluding upon initial take but after careful scrutiny of the laws regarding estate taxes and gift taxes, it would not be wise not to accept the offer. The consequences that will follow after the alumnus is deceased are far costlier than the plot of land itself. The IRS also views such transactions as a way of avoiding property tax and is ruthless in its actions One of the most oldest and common forms of taxation is the taxation of property held by an individual at the time of death. This can take the form of estate tax (a tax levied on the estate before any transfers). Gift laws are generally designed to prevent complete tax avoidance by this route.
The Federal Estate tax is integrated with the Federal Gift tax so that large estates cannot be shielded from taxation by lifetime giving, as it is in this case. (5) The President may see this offer as a generous contribution to the College and will be thankful for the alumnus for his present. He may view the offer similar to a cash donation to a particular building in return for a memorial built in the name of the alumnus. The tax involved in this case, however, makes this situation very different. The government is in loss in such transactions because it will not receive the property tax upon the death of the alumnus. However, there are ways that the school can take this donation if the proper cases have been filed prior to the transaction.
Only about 2 % of all estates are subject to the estate tax. For example, there is usually no tax if one makes a gift to his spouse or a qualified charity at his death. But the school has to put that money, not for recreation activities but for scholarship reasons. If the person chooses to give the estate to someone else, then the estate tax does not apply until the value of the estate given to that recipient is more than the annual exclusion for the year ($ 1, 000, 000 in 2002, 2003 and 1, 500, 000 in 2004 and 2005). Although a return may be required, no actual gift will become payable until the cumulative lifetime taxable gifts exceed the application exclusion amount.
In this case, proper inspection of the lands worth is essential. This will eliminate the issue of tax evasion by the school. (5) The recipient who receives the gift or the estate will not have to pay any estate tax immediately after the transaction according to the provisions made by IRS. But by doing so, the person giving the estate must fully subtract the unified credit (an amount that eliminates or reduces tax) from any estate / gift tax he owes. Estate taxes apply to the persons estate at his time of death.
The taxable estate is usually the gross estate less allowable deductions. Gross estate will include, life insurance proceeds payable to the estate, value of certain annuities, value of property transferred within 3 years before demise, and trusts or other interests established. In conclusion, as an adviser, the best policy to conduct is have a real estate agent value the land and compare it to the exclusion amount to see if accepting the donation will be a wise decision. Or else, the donation must e used for other charitable purposes than the construction of a recreational facility. 5. Monopolies and the Promise of Deregulated Electric-Power Markets This is the classic tale of the consequences of being too profit oriented and taking extra risks.
These power companies predicted the great need for excess power at the time they raised their electricity generating capacity by almost 24 % in hopes that their investment will mature around 2010. This assumption was not based on any trends of new markets that would change the electric consumption of customers. They had taken markets that utilize efficient plants and environmental concerns too lightly. They also overlooked scams like the Enron case.
Profit was their highest concern and in doing so, they paid the price for racking up the extra risk. Electricity is the principal force that powers modern society. It lights buildings and streets, runs computers and telephones, drives trains and subways, and operates all variety of motors and machines. The almost-century old structure of the American electric utility industry was in need of change. With this information, almost all interested parties accepted the fact that technological change and the views of the of government intervention, to make the idea of increased competition attractive (Johnson) thereby, encouraging the idea of deregulation. Stability in electrical power had traditionally depended on a system highly regulated by federal and state government.
In recent years, however, many leaders in government and industry alike pushed for deregulating the system to make it more responsive to changes in business and technology and more open to the forces of free-market competition (Craven C 5). Deregulation had been successful in reducing costs and promoting innovation in airlines, natural gas, telecommunications and other industries. This was looking promising as nothing ever before and tasks of deregulating power to allow for the predicted increase in power consumption seemed nothing less than a high-return investment. Restructuring of the electric utility industry meant that deregulation would occur in terms of prices and entry of competitors into the market. In the prosperous years, when new construction of power plants reduced the average cost of electricity, regulation that set rates based on the value of the new equipment worked fine because rates generally decreased. In the 1970 s and later, utility construction became more and more costly, and the high rates were a result of those higher costs (Williams 26).
Regulatory rules encouraged utilities to complete long-delayed power plants even if the demand for power was not likely to warrant such big plants or because poor management caused costs to escalate What the market had not expected was the introduction of other energy alternatives in the market. Fuel cells making electricity and water, micro-turbines using natural gas, photovoltaic cells and energy storage systems which allow people to obtain electricity from the sun allow people to isolate or remove themselves from the electric power grid. This is exactly what happened. Natural gas was in demand as well as fuel cells making deregulation a fruit that promised seeds but gave worms. These markets are racking up their debts and may find it hard to recover after Billions of dollars in loss. This exercise tells a lot about planning and forecasting for the future.
All possibilities that may change the market should be deeply thought of and well researched. Profit should not be a major incentive for these corporations since laws concerning monopolies are already crippling more victims and being too greedy is too pricey in the end. 6. Grocery Wars This is a war between major vendors to rack up profits. H-E-B had been a monopoly in the grocery market in that particular region and driving other competition away, including the unionized firm Kroger. The second retailer in the region is Albertsons.
When another big retailer, popular in other market products, enters the grocery market in the region, the oven is heated and price wars will launch. Target is a retailer for many products that are in everyday use. Grocery is an unusual sector of its market, but since it has the customers already familiar with it, it will become a major competition. It will provide convenience for shoppers to do their grocery shopping while already in the store for other supplies; a major threat to market already established by H-E-P.
Our economy is basically based on the concept of competition. Competition is defined in Webster's Dictionary as being a trial of skill or ability. There are many benefits big stores as such can offer to the region, such as a decrease in the unemployment rate, as well as an increase of individual and per capita income. They would also be able to create a larger tax base, and also increase visits to the city by out-of-towner's.
In addition, they may have an increase in total retail sales at the cost of smaller businesses and surrounding communities. The situation mentioned in this case is simply a question of maintaining utilitarian standards. The utilitarian principle of justice states, "a society is a just one to the extent that its basic institutions are so organized as to promote the greatest overall or average happiness of its members. " A competitive market is something that utilitarians had worked for over the years. The presence of H-E-B in the region where no other competition existed before created a good return for the company. The coming of these companies, on the other hand, created competition, be it good or bad. The utilitarian belief is that an unregulated market distributes resources fairly.
This is a situation where perfect competition drives the market. Retailers are competing with one another in two major forms. Providing lower prices and getting more local presence for convenience. Since brand names are not very significant in the grocery market, most people will simply choose one store over the other as substitutes; a situation most commonly known as ceteris paribus. Thus the question of providing lower prices becomes weak so the retailers have to switch their game plans and concentrate on other ways to induce their customers. Having local presence will surely set each company over the other so these companies will undoubtedly buy estate to cover more people and their grocery supply needs.
Firms that were unionized like Kroger did not even stand the chance in the competition set by H-E-B. The main reason that this competition stood firm is because all three companies are nationwide and popular. Kroger was only a regional chain and did not have the tool to exploit its competitor with the same amount of tools as it was being exploited; clearly the stronger side prevailed and derailed Kroger's presence. Although an illegal approach, luring away each others employees is an evident technique that each company will provide to learn each others way.
Inside information will be essential to emerge over the top in the competition. Work Cited Page Discrimination in Price, services, or facilities US Code Collection, Title 15, Chapter 1, Section 13. a. Legal Information Institute. Cornell Law School.
Retrieved on December 12, 2005 web Craven, Eric. "Educating consumers about utility deregulation and purchasing. " Kansas City Star 12 March 1998: C 5. Williams, Terry. "Electric Deregulation. " Time 23 April 1996: 21 - 27. Surowiecki, Jim. Throwing A Merger Block.
Rogue April 15, 1997. Retrieved on 13 December 2005. web Estate and Gift Taxes. Internal Revenue Service. Retrieved on 13 December 2005. web
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