By implication, the emphasis of the model is that a country should produce and export goods which it has its factors in abundance to produce. The theory is also referred to as 2x2x2 model because it is employed to assess trade and trade equilibrium between two countries that have different areas of specializations and natural resources. The Heckscher-Ohlin (H-O) model is an international economic theory which states that each country should produce and export what it is most efficient in. The ratio of the quantity of labor to the quantity of capital is different for each nation, resulting in different relative endowments of capital and labor. Therefore, the taxable dividend is $15,000.ĭ. Taxable dividend = Fair market value - Tax liability on the land When a company distributes an asset as a dividend to the owner, any liability taken over on the assets will be deducted from the fair market value of the asset to arrive at the taxable dividend.įrom the question, the $55,000 tax liability assumed by Troy will be deducted from the fair market value of the asset to obtained the taxable dividend as follows: Put simply, the fair market value of an asset gives an estimation of the price that a buyer would pay to the owner of the asset if the owner decides to sell the asset. The fair market value is the amount at which an asset or a company will be exchanged between a knowledgeable willing seller and a knowledgeable willing seller in an ordinary transaction in the market. The relevant variables are the friar market value and the tax liability on the land.
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