Cynthia is a successful sculptor who created a work that is now worth $400,000 and hasno tax basis. Cynthia forms a corporation and contributes the sculpture to it in exchangefor the corporation's shares. Fourteen months later, she sells all the stock for $400,000.She wants to treat the sale of the stock as a long-term capital gain. Evaluate the proprietyof Cynthia's actions.

Approach to Solving the Question:Consider what Cynthia has done and appraise the importance of the…

Answered: Cynthia is a successful sculptor who…

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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Sam and Devon agree to go into business together selling college-licensed clothing. According to the agreement, Sam will contribute inventory valued at $146,000 in return for 80 percent of the stock in the corporation. Sam's tax basis in the inventory is $79,000. Devon will receive 20 percent of the stock in return for providing accounting services to the corporation (these qualify as organizational expenditures). The accounting services are valued at $36,500. (Negative amount should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.) Assume Devon received 25 percent of the stock in the corporation in return for his services. h. What is Devon's tax basis in the stock he receives in return for his contribution of services to the corporation? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.) Tax basis
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Sadie sold 11 shares of stock to her brother, George, for $600 sixteen months ago. Sadie had purchased the stock for $800 two years earlier. If George sells the stock for $1,000 what is the amount and character of his recognized gain or loss in the current year?
Bruce and Amanda are married during the tax year. Bruce is a botanist at Green Corporation. Bruce earns a salary of $56,000 per year. Green Corporation has an accountable reimbursement plan. During the year, Bruce has $5,000 of employee expenses. Green Corporation reimburses Bruce for only $4,000 of expenses.Bruce decides to put $5,500 into a Traditional IRA. Amanda owns a financial consulting firm as a sole proprietor (it qualifies as a full trade or business). Amanda generates $80,000 of revenues during the year. She has the following business payments associated with her firm:● Utilities: $2,000● Office Rent: $14,000● Self-Employment Tax: $5,000● Salary for her secretary: $20,000● Fines/Penalties: $8,000● Payroll Taxes (Employer Portion): $1,000● Business Meals: $2,000● Bribe to police officer to forgive parking violation $1,500Due to the income and expenses above, Amanda has $39,500 of Qualified Business Income. Also, during the year a tornado damaged the roof of their personal…
Sam and Devon agree to go into business together selling college-licensed clothing. According to the agreement, Sam will contribute inventory valued at $146,000 in return for 80 percent of the stock in the corporation. Sam's tax basis in the inventory is $79,000. Devon will receive 20 percent of the stock in return for providing accounting services to the corporation (these qualify as organizational expenditures). The accounting services are valued at $36,500. (Negative amount should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.) d. What is Devon's tax basis in the stock he receives in return for his contribution of services to the corporation? Tax basis
Hannah Tywin owns 100 shares of MM Inc. stock. She sells the stock on December 11 for $25 per share. She received the stock as a gift from her Aunt Pam on March 20 of this year when the fair market value of the stock was $18 per share. Aunt Pam originally purchased the stock seven years ago at a price of $12 per share. What is the amount and character of Hannah's recognized gain or loss on the stock?
Lena is the sole shareholder and president of Gold Corporation, which is a C Corporation. She feels that she can justify paying herself a $50,000 bonus this year because of her excellent performance for the company. However, rather than a bonus, she considers having Gold pay her a $50,000 dividend. She believes this would be preferable because it will be taxed at only 15% as a “qualified dividend” instead of being taxed at her marginal income tax rate of 35% as a bonus. Assuming that Gold Corporation is in the 21% federal tax bracket, how much federal income tax could Lena save by taking the bonus?Given that Lena owns 100% of Gold Corporation you should analyze this decision from both the corporation and individual tax perspectives (an “integrated” analysis). You can ignore any state or social security tax considerations. Reminder: dividends paid by a C Corporation are nondeductible for federal income tax purposes.
Sean sells land to Eli, his brother, for the fair market value of $39,000. Six months later when the land is worth $45,000, Eli sells the property to his son, Jon, without gift tax. His son sells the land for $47,000. Sean’s adjusted basis for the land is $24,000 what is Jon’s recognized gain or loss on the sales?
Gary receives $40,000 worth of Quantro, Inc., common stock from his late grandmother's estate. Early in the year, he receives a $100 cash dividend. Four months later, he received a 2% stock dividend. Near the end of the year, Gary sells the stock for $42,000. Due to these events only, how much must Gary include in his gross income for the year?
This answer is wrong . please give me the right answer.
Charlene owns a 70 percent interest in Maupin Mopeds, which is organizedas a partnership. She wants to open another business and needs office spacefor it. She has Maupin distribute a building worth $150,000 to her in lieu of her normal cash distribution. Maupin’s basis in the building is $55,000. Charlene’s basis in Maupin is $80,000. identify the tax issue(s) posed by the facts presented.Determine the possible tax consequences of each issue that you identify.
Sheila’s mother purchased 100 shares of Apple stock in 1992. The original sale price was $26 per share for a total value of $2,600. She kept those 100 stocks until her death in June 2022. By the time of her death, the Apple stock value is $190 per share for a total value of $19,000. Sheila will not owe taxes for capital gains on the $16,400 increase in value. Why do you think the gains and losses should be separated from sheila's other gains and losses?

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