Derek has shares of UltFrisCorp that he would like to transfer, using Section 85, to a holding companythat he has recently setup. The ACB and PUC of his UltFrisCorp shares are $30,000. The fair marketvalue of the shares are $1 million. Derek also has $450,000 in his lifetime capital gains exemptionthat he would like to use as part of this transfer.What is the elected amount that Derek should chose in order to use his lifetime capital gainsexemption, and avoid paying tax on the transfer.1,000,00030,000480,000450,000

Section 85 of the Income Tax Act allows for the tax-deferred transfer of property between a taxpayer…

Answered: Derek has shares of UltFrisCorp that he…

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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! Required information [The following information applies to the questions displayed below.] Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $200,000 in return for 50 percent of the corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted tax bases in return for 50 percent of the corporation's stock: (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) Building Land Total FMV $ 75,000 175,000 $ 250,000 Adjusted Tax Basis $ 20,000 80,000 $ 100,000 To equalize the exchange, Wizard Corporation paid Hermione $50,000 in addition to her stock. Gain or loss realized Gain or loss recognized a. What amount of gain or loss does Ron realize on the formation of the corporation? What amount, if any, does he recognize?
María and Bob form Robin Corporation. María transfers property worth $420,000 with a basis of $150,000 for 70 shares in Robin Corporation. Bob receives 30 shares for property worth $165,000 with a basis of $30,000 and legal services worth $15,000 in organizing the corporation. If there is no gain or loss, enter "0" for the amount. a. What gain or income, if any, will the parties recognize on the transfer? María recognizes no gain or loss Feedback of $ Bob recognizes ordinary income of $ Check My Work Section 351 is mandatory if a transaction satisfies the provision's requirements. The three requirements for nonrecognition of gain or loss under § 351 are that (1) property is transferred (2) in exchange for stock and (3) the property transferors are in control of the corporation after the exchange. b. What basis do María and Bob have in the Robin Corporation stock? María has a basis of $ Feedback Check My Work Incorrect , and Bob has a basis of $ 420,000 X in the stock. c. What is Robin…
Tom is talking to his friend Bob, who has an interest in Freedom, LLC, about purchasing his LLC interest. Bob's outside basis in Freedom, LLC is $8,500. This includes his $2,200 one-fourth share of the LLC's debt. Bob's 704(b) capital account is $15,500. If Tom bought Bob's LLC interest for $14,000, what would Tom's outside basis be in Freedom, LLC?
Frank has 200 shares of XYZ, Inc. with a basis of $5,000 and a value of 7,500. He receives a tax-free stock dividend of 50 additional shares, worth $2,500. (a) After the stock dividend, what is his per share basis in the stock? In other words, if he sells 1 share of stock, what is the basis in that share for determining the gain on the sale of the share? (b) Suppose it was a tax-free dividend, but the 50 new shares were of preferred stock – what would his basis be in common stock and in the preferred stock?
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
Allen, Barry, and Carl are incorporating their real estate sales partnership, which will become the ABC Corporation. Allen will contribute a building with a basis of $25,000 and a fair market value of $50,000 in return for 500 shares. Barry and Carl will each contribute $50,000 cash for 500 shares each. To retain the services of their top sales associate, Drake, they will provide 500 shares to him in return for his services. Explain the tax consequences of these transactions for each shareholder, and the corporation.
Dimas owns a parcel of land worth P5,000,000 which he inherited from hisfather in 2018 when it was worth P3,000,000. His father purchased the propertyin 2007 for P1,000,000. If Dimas transfers this parcel of land to ABCCorporation, in exchange for shares of stock of said corporation worthP4,500,000. The aggregate basis of Dimas for all his ABC Corporation shares is______. a. 3,500,000b. 2,000,000c. 1,000,000d. 3,000,000
Mr. Hippo owns 10,000 shares of Lowland Corporation common stock, which he purchased on March 8, 2011, for $200,000. On October 3, 2018, Hippo purchases an additional 4,000 shares for $76,000. On October 12, 2018, he sells the original 10,000 shares for $170,000. On November 1, 2018, he purchases an additional 4,000 shares for $66,000. Read the requirements. Requirement a. What is Mr. Hippo's recognized gain or loss as a result of the sale on October 12, 2018? Amount Gain or loss $ 6,000 loss Gain or loss to be recognized Requirement b. What are the basis and the holding period of the stock he continues to hold? (Do not round interim calculations. Only round the amount you input in the input field to the nearest dollar.) Basis Holding period begins 4,000 purchased on October 3, 2018 4,000 purchased on November 1, 2018
Ann and Bob form Robin Corporation. Ann transfers property worth $420,000 (basis of $150,000) for 70 shares in Robin Corporation. Bob receives 30 shares for property worth $165,000 (basis of $30,000) and for legal services (worth $15,000) in organizing the corporation. ations What gain or income, if any, will the parties recognize on the transfer? b. What basis do Ann and Bob have in the Robin Corporation stock? What is Robin Corporation's basis in the property and services it received from Ann and Bob? a. C.
Pat Middleton owns a non-depreciable capital asset that originally cost $20,000 and is now worth $80,000. Pat transfers the asset to a corporation, receiving as payment debt of $60,000 and preferred shares with a value of $20,000. Pat and the corporation will elect under Section 85 to avoid paying tax on the transfer. Determine the appropriate transfer price under Section 85. Determine the cost of the asset for the corporation, and the ACB and PUC for the preferred shares received as consideration.
In 2021, Ruth transfers the following property for an 80% interest in RGB corporation (1,000 shares): Land with a FMV of $100,000 and an adjusted basis of $20,000. The land had a $40,000 mortgage which was assumed by the corporation. What is the basis of Ruth’s stock in RBG Corporation?

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