35. Brian owns 200 shares of Bell Corp. stock purchased in January 2018 for $2,400. On January 30, 2020, he receives 200 taxable stock rights valued at $5 with the right to purchase additional shares at $25. a. How much income does Brian have? What is the basis in the rights? When does the holding period of the rights begin? b. On February 20, 2021, Brian exercises 100 rights and sells the remaining 100 rights for $7 each. What is the basis of each new share? When does the holding period begin? How much and what kind of gain does he have on the sale of the rights?

35. Brian owns 200 shares of Bell Corp. stock purchased in January 2018 for $2,400. On January 30, 2020, he receives 200 taxable stock rights valued at $5 with the right to purchase additional shares at $25. a. How much income does Brian have? What is the basis in the rights? When does the holding period of the rights begin? b. On February 20, 2021, Brian exercises 100 rights and sells the remaining 100 rights for $7 each. What is the basis of each new share? When does the holding period begin? How much and what kind of gain does he have on the sale of the rights?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Ee.7.
On December 12, 2020, Jack contributed a painting to Kyle, LLC that was valued at $100,000 (basis of $5,000) in exchange for a 50% capital and profits interest in the LLC. Josh contributed $100,000 in cash and received a 50% interest in the LLC. On December31, Jack withdrew $50,000 in cash from the LLC and then on January 17, 2021, Josh purchased Jack's entire interest in the LLC for $50,000 and the partnership distributed the painting to Josh on February 15, 2021. What adjustments if any might the IRS make? Explain the consequences of such an adjustment to Josh & Jack and how this could have been prevented.
Mr. Peter Brown owns 3,000 shares of Trend Enterprises Inc. These shares have an adjusted cost base of $150 per share. On December 31, 2020, the shares are trading at $170 per share. At this time, he gives 500 of these shares to his 13 year old daughter. He gives the remaining 2,500 shares to his wife. During 2021, the shares pay eligible dividends of $5 per share. On December 31, 2021, both his daughter and his spouse sell their shares for $130 per share. Assume that Mr. Brown does not elect out of ITA 73(1). Indicate the tax consequences of these transactions for Mr. Brown, his daughter, and his spouse, in each of the years 2020 and 2021. If there are no tax consequences for either individual in a given year, you should clearly state this fact in your answer.
John Broward owns 1,500 shares of Silver Fox Corporation common stock. John purchased the 1,500 shares on April 17, 2011, for $21,000. On December 8, 2018, John sells 750 shares for $5,000. On January 2, 2019, John buys 250 shares of Silver Fox Corporation common stock for $1,750 and 50 shares of Silver Fox Corporation preferred stock for $1,000. The preferred stock is nonvoting, nonconvertible. What is John’s realized and recognized loss on the December 8 sale of stock? What is his basis and the holding periods of the shares purchased in 2011 and in 2018? I believe I have the correct answers for question 1 but I'm not sure if I understand determining the basis for question 2. I'm not sure I understand the explanation and the example in my textbook, so, a detailed, yet simplified explanation would be very helpful.
Penny owns 501 shares of Mack Co. They have an adjusted cost base of $15.6 per share. On March 31, 2020, Penny sold all of her shares for $13.21 per share. After she sold the shares, the price fell further and on April 15, 2020, Penny purchased 263 of the same class of shares of Mack Co. for $10.67 per share. She was still holding all of the shares at the end of 2020. What is the adjusted cost base of the Mack Co shares Penny holds at the end of 2020?
22.Suppose that at the beginning of 2019 Jamaal's basis in his S corporation stock was $32,500 and Jamaal has directly loaned the S corporation $9,900. During 2019, the S corporation reported an $85,500 ordinary business loss and no separately stated items. How much of the ordinary loss is deductible by Jamaal if he owns 50 percent of the S corporation?
Bob has significant of taxable gain in 2021 that he is planning to include on his total income. He would like to sell his 20,000 shares of a public company that is currently at a loss. How much is the allowable capital loss if he purchased the 20,000 shares at $3 per share and wants to sell at $1 per share? Question 14 options: a) $40,000 b) $60,000 c) $25,000 d) $20,000
24) Individuals Opal and Ben form OB Corporation. Opal transfers land and a building with a $550,000 adjusted basis and a $625,000 FMV in exchange for 50% of the stock of the OB Corporation worth $610,000 and a $15,000 note. Ben transfers cash of $625,000 for 50% of the stock worth $610,000 and a note of the OB Corporation valued at $15,000. Opal's basis in the stock received is A) $560,000. B) $625,000. C) $610,000. D) $550,000.
Alex purchased $5000 worth of shares in a small biotech company on 1 September 2019. At 31 December 2019, the company declared and paid an interim dividend of $700 which was unfranked. What amount must Alex include in his assessable income for the 2020 year as ordinary or statutory income? a. $700 b. None of the above. c. $5,000 d. $1,000
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James purchased 100 shares of stock on December 5, 2022 for $10,000 ($100p/s). James then re-purchased 50 shares on February 1, 2023 for $1000 ($20 p/s). What are the tax consequences for 2023 tas filings?
On January 1, year 1, Dave received 1,000 shares of restricted stock from his employer, RRK Corporation. On that date, the stock price was $7 per share. Dave's restricted shares will vest at the end of year 2. He Intends to hold the shares until the end of year 4, when he intends to sell them to help fund the purchase of a new home. Dave predicts the share price of RRK will be $30 per share when his shares vest and will be $40 per share when he sells them. Note: Leave no answer blank. Enter zero if applicable. Input all amounts as positive values. Required: a. If Dave's stock price predictions are correct, what are the taxes due on these transactions to Dave if his ordinary marginal rate is 32 percent and his long-term capital gains rate is 15 percent? b. If Dave's stock price predictions are correct, what are the tax consequences of these transactions to RRK? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A…