10 Max was party to a cross-purchase, buy-sell agreement when he died and owned 100 shares of TKL Inc. All of the parties to the agreement were dealing at arm's length. The agreement specified that the surviving shareholders would purchase Max's shares for a fixed price of $40 per share. Charlie originally acquired the shares for $5 per share. At the time of Max's death, the actual value of share was $60. Which of the following is true with regards to Max holding TKL Inc shares? a) Max's final tax return would not have a capital gain. Ob) Max's final tax return would show a capital gain of $20 per share. Max's final tax return would show a capital gain of $35 per share. d) Max's final tax return would show a capital gain of $55 per share.

10 Max was party to a cross-purchase, buy-sell agreement when he died and owned 100 shares of TKL Inc. All of the parties to the agreement were dealing at arm's length. The agreement specified that the surviving shareholders would purchase Max's shares for a fixed price of $40 per share. Charlie originally acquired the shares for $5 per share. At the time of Max's death, the actual value of share was $60. Which of the following is true with regards to Max holding TKL Inc shares? a) Max's final tax return would not have a capital gain. Ob) Max's final tax return would show a capital gain of $20 per share. Max's final tax return would show a capital gain of $35 per share. d) Max's final tax return would show a capital gain of $55 per share.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Harry acquires 100% of David on January 1, 2010 by issuing 10,000 shares with par value $1 and fair value $70. In addition, Harry agrees to pay an additional $100,000 if David earns $50,000 net income in 4 years. David will be operated as a separate subsidiary of Harry. At acquisition date, there is a 80% probability of this occurring. On January 1, 2010, Harry had net assets with book value of $400,000 and fair value of $500,000. At that date, David had net assets with book value of $200,000 and fair value of $150,000. At December 31, 2012, Harry has net assets with book value of $600,000 and fair value of $800,000. At that date, David has net assets with book value of $300,000 and fair value of $400,000. Assume that all differences between book value and fair value relate to Land. a. Ho w much is goodwill at January 1, 2010 (show calculation). b. How much is goodwill at December 31, 2012 (assume no impairment)
5. Warren Peace passed away, with his will leaving the bulk of all his worldly possessions to his friend Leo. The following transactions occurred with respect to Warren's estate. 1. Warren's estate inventory included 10,000 shares of Newberry Industries, selling at the time of Warren's death at $56 per share. There were no outstanding dividends at the time Warren died, but two weeks later, a $1.00 per share dividend was declared. 2. Warren only designated one item that was not to be left to Leo. Warren's family had a signed, first-edition copy of a classic novel that was valued and included in the estate inventory at $67,000, which Warren left to the local library. The book is located and delivered. 3. Funeral expenses are paid in the amount of $7,880. 4. A statement comes from the insurance company indicating there are multiple charges from Warren's final hospital stay that will not be covered and are the responsibility of the estate. These fees amount to $39,000 and were not…
Multiple shareholders form a new corporation in exchange for stock with a fair market value of $1,000 per share. Marky transfers investment land (current fair market value of $35,000) that he purchased 10 year ago for $15,000. In exchange, Marky receives 30 shares of stock and $5,000 cash. Anders transfers a machine with a basis of $45,000 and a fair market value of $35,000. Anders receives 30 shares of stock and $5,000 cash. Emmy transfers a rental office building (current fair market value of $45,000) that she purchased 20 years ago for $60,000. Its current basis is $15,000 after recognition of $45,000 in depreciation expense. The corporation assumes the $20,000 balance on the original mortgage and Emmy receives 25 shares of stock from the corporation in the exchange. Jace provided the legal services to organize the corporation (value $5,000) and contributes $10,000 in cash in exchange for 15 shares of stock. How much gain does Emmy recognize? a. 0 b. $5,000 c. $15,000 d. $20,000…
Please help me to solve this problem
Show your work Cerulean Corporation has two equal shareholders, Marco and Avery. Marco acquired his Cerulean stock three years ago by transferring property worth $700,000, basis of $300,000, for 70 shares of the stock. Avery acquired 70 shares in Cerulean Corporation two years ago by transferring property worth $660,000, basis of $110,000. Cerulean Corporation’s accumulated E & P as of January 1 of the current year is $350,000. On March 1 of the current year, the corporation distributed to Marco property worth $120,000, basis to Cerulean of $50,000. It distributed cash of $220,000 to Avery. On July 1 of the current year, Avery sold her stock to Harpreet for $820,000. On December 1 of the current year, Cerulean distributed cash of $90,000 each to Harpreet and Marco. What are the tax issues?
Miss Wells has purchased the shares of two companies over the years. Each company has only one class of shares. Purchases and sales of shares in the first of these companies, Memo Inc., are as follows: February, 2015 purchase November, 2016 purchase April, 2017 purchase October, 2017 sale September, 2019 purchase November, 2019 sale 60 @ $24 90 @ 28 45 @ 30 (68) @ 36 22 @ 26 (53) @ 40 Purchases and sales of shares in the second company, Demo Ltd., are as follows: April, 2018 purchase December, 2018 purchase July, 2019 sale $24 160 @ (260) @ 36 200 33 Required: A. Determine the cost to Miss Wells of the Memo Inc. shares that are still being held on December 31, 2019. B. Determine the taxable capital gain resulting from the July, 2019 disposition of the Demo Ltd. shares.
The question is in the attached image.
Hayden owns 100% of the shares of ABC Co. Hayden's spouse owns 100% of the shares of XYZ Co. The shares of ABC Co. are valued at $50,000 with an ACB and PUC of $1000. The couple planning for XYZ Co. to pay Hayden $50,000 in cash for the shares in ABC Co. Which of the following will result from this sale? Multiple Choice Hayden will recognize a capital gain of $49,000. Hayden will recognize a deemed dividend of $50,000 and a capital gain of $0. Hayden will recognize a deemed dividend of $49,000 and a capital gain of $0. Hayden will recognize a capital gain of $50,000.
On the formation of X Corp, Moustapha transfers land with a basis of $40,000 and a FMV of $60,000 in exchange for 60 shares (60%) of common stock of X Corp, and Ava transfers equipment with a basis of $40,000 and a FMV of $10,000 in exchange for 40 shares (40%). Two months later, pursuant to a prearranged binding agreement, Ava sells all her X Corp stock to Rose for $40,000 cash. What are the tax consequences to Moustapha and Ava of the transfers to X Corp? O $20,000 gain to Moustapha; no gain/loss to Ava O $20,000 gain to Moustapha; $30,000 loss to Ava O No gain/loss to either O No gain/loss to Moustapha; $30,000 loss to Ava
At the beginning of Year 1 Ms. Mushroom, an individual, purchased a 20 percent interest in Fungi Partnership for $23,000. Ms. Mushroom’s Schedule K-1 reported that her share of Fungi’s debt at year-end was $26,000, and her share of ordinary loss was $44,400. On January 1, Year 2, Ms. Mushroom sold her interest to another partner for $3,400 cash. Required: How much of her share of Fungi’s loss can Ms. Mushroom deduct on her Year 1 tax return? Compute Ms. Mushroom’s recognized gain on sale of her Fungi Partnership interest. How would your answers to parts a and b change if Fungi were an S corporation instead of a partnership?