Flintstone Company is owned equally by Fred Stone and his sister Wilma, each of whom holds 1,000 shares in thecompany. Wilma wants to reduce her ownership in the company, and it was decided that the company will redeem 250 ofher shares for $25,000 per share on December 31 of this year. Wilma's tax basis in each share is $5,000. Flintstone hascurrent E&P of $10,000,000 and accumulated E&P at the beginning of the year is $50,000,000.a. What are the amount and character (capital gain or dividend) recognized by Wilma as a result of the stock redemption, assumingonly the "substantially disproportionate with respect to the shareholder" test is applied?Dividend

Exploration and production (E&P) is the upstream component of the oil and gas industry that…

Flintstone Company is owned equally by Fred Stone and his sister Wilma, each of whom holc company. Wilma wants to reduce her ownership in the company, and it was decided that the her shares for $25,000 per share on December 31 of this year. Wilma's tax basis in each shai current E&P of $10,000,000 and accumulated E&P at the beginning of the year is $50,000,O hat are the amount and character (capital gain or dividend) recognized by Wilma as a result of the "substantially disproportionate with respect to the shareholder" test is applied?

Flintstone Company is owned equally by Fred Stone and his sister Wilma, each of whom holc company. Wilma wants to reduce her ownership in the company, and it was decided that the her shares for $25,000 per share on December 31 of this year. Wilma's tax basis in each shai current E&P of $10,000,000 and accumulated E&P at the beginning of the year is $50,000,O hat are the amount and character (capital gain or dividend) recognized by Wilma as a result of the "substantially disproportionate with respect to the shareholder" test is applied?

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

Tall Corporation (an S-corporation) has AAA of $16,000 and AEP of $8,000 .Tall Corp. distributes $20,000 of cash to its Henry, the sole shareholder. Henry's basis in his S Corp stock before the distribution is $40,000. Henry is in the 37% tax bracket. 1. What are the tax consequences to Henry as a result of this distribution? 2. What is ending balance in AAA and AEP. What is Henry's ending stock basis?
Carolina Corporation, an S corporation, has no corporate Earnings and profit from its years as a C corporation. At the end of the year, it distributes a small parcel of land to its sole shareholder, Shadiya. The fair market value of the parcel is $96,600, and its tax basis is $59,000. Shadiya's basis in her stock is $23,500. Assume Carolina Corporation reported $0 taxable income before considering the tax consequences of the distribution. Note: Leave no answer blank. Enter zero if applicable. d. Assume the fair market value of the land is $40,200 rather than $96,600. How much gain must Shadiya recognize (if any) as a result of the distribution, what is her basis in her Carolina Corporation stock after the distribution, and what is her basis in the land? Gain Recognized Stock Basis Land Basis
Dave and his friend Stewart each owns 50 percent of KBS. During the year, Dave received $96,000 compensation for services he performed for KBS during the year. He performed a significant amount of work for the entity, and he was heavily involved in management decisions for the entity (he was not a passive investor in KBS). After deducting Dave's compensation, KBS reported taxable income of $38,400. How much FICA and/or self-employment tax is Dave required to pay on his compensation and his share of the KBS income if KBS is formed as a C corporation, an S corporation, or a limited liability company (taxed as a partnership) (ignore the 0.9 percent additional Medicare tax)? How much FICA tax would the entity be required to pay on the compensation paid to Dave? Note: Do not round any percentage calculations. Round other intermediate calculations and final answers to the nearest whole dollar amount. C Corporation S Corporation Limited liability company FICA Tax that Dave pays FICA Tax that…
Rock Corporation distributed property with a fair market value of $100,000 and an adjusted basis of $70,000 to Ann, a shareholder of Rock Corporation. Prior to the distribution, Rock Corporation had a deficit in accumulated earnings and profits of $200,000 and current earnings and profits of $20,000. Ann has stock basis in Rock Corporations of $90,000. Assume that Ann is an individual in the 37% tax bracket. Determine Ann’s tax liability for this distribution.
Ms. Xie, who is in the 37 percent tax bracket, is the sole shareholder and president of Xenon. The corporation's financial records show the following: Gross income from sales of goods: 1,590,000 Operating expenses: (930,000) Salary paid to Ms. Xie: (300,000) Dividend distributions: (200,000) Required: a. Compute the combined tax cost for Xenon and Ms. Xie. (Ignore payroll tax.) b. How would your computation change if Ms. Xie's salary was $500,000 and Xenon paid no dividends?
Ramona and Hermione formed Wiley Corporation on January 2. Ramona contributed cash of $300,000 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: FMV Building $112,500 Land 262,500 Total $375,000 Adjusted Tax Basis $30,000 120,000 $150,000 To equalize the exchange, Wiley Corporation paid Hermione $75,000 in addition to her stock. i. Assume Hermione's adjusted tax basis in the land was $375,000. What adjusted tax basis does Wiley Corporation take in the land and building received from Hermione seperately?
On December 7 of the tax year, S (a single taxpayer) decided to sell all of the stock that she owns and reinvest the proceeds in state of Colorado bonds. Information about the stock is provided below: Corporation FMV Basis Holding Period ABC $180,000 $130,000 11 months LMN 200,000 255,000 5 years XYZ 382,000 300,000 2 years She is willing to sell some of the stock this year and the remaining stock next year if it is more advantageous to spread the sales over two years. Assume the fair market value of the stock will not change and her regular tax rate is 32% (and will be 32% next year). (Disregard present value calculations and the medicare tax on net investment income.) Determine the change in her income tax for the two years combined if she sells ABC and LMN this year and XYZ in March of next year.
Danni is a single 30 percent owner of Kolt (a business entity). In the current year, Kolt reported a $1,000,000 business loss. Answer the following questions associated with each of the following alternative scenarios: Note: Leave no answer blank. Enter zero if applicable. b. Kolt is organized as an LLC taxed as a partnership. Thirty percent of Kolt's loss is allocated to Danni. Danni works 20 hours a week on Kolt business activities (she is not considered to be a passive investor in Kolt). Danni has a $400,000 basis in her Kolt ownership interest, and she also has a $400,000 at-risk amount in her investment in Kolt. Danni does not report income or loss from any other business activity investments. How much of the $300,000 loss allocated to her from Kolt is Danni allowed to deduct this year? THE ANSWER IS NOT 250,000 OR 300,000 OR 400,000
Carl contributes equipment with a $50,000 adjusted basis and an $80,000 FMV to cook Corporation for 50 of its 100 shares of stock. His son Carl Jr. contributes $20,000 cash for the remaining 50 Cook shares. What tax issues regarding the exchanges should carl and his so consider?
Check my work. Bill and Mary filed a joint Federal income tax return this year. Mary owns a 30% interest in MAJIC Partnership, a women’s dress boutique. Mary’s share of the partnership’s net income is $280,000. Her shares of the partnership’s W–2 wages and unadjusted basis of depreciable property are $100,000 and $300,000, respectively. Mary’s share of the partnership income is $280,000 * 20% = $56,000 50% of W-2 wages is $100,000*.5= $50,000 25% of W-2 wages plus 2.5% of adjusted basis of depr prop = $100,000 * 25% +$300,000 * 2.5% =$32,500 The QBI deduction is $50,000 per the limitation phase What is the maximum QBI deduction if MAJIC’s income was from qualified services and Bill and Mary’s total taxable income was $450,000? The QBI deduction can be used for qualified service businesses only if the taxable income before the QBI deduction does not exceed the threshold. Since MAJIC’s…
Ellie and Linda are equal owners in Otter Enterprises, a calendar year business. Ellie has a basis in Otter Enterprises of $80,000 at the beginning of the year. Linda has a basis in Otter Enterprises of $60,000 at the beginning of the year. Assume that Otter Enterprises has no debt. Otter Enterprises has $320,000 of gross income and $210,000 of operating expenses. In addition, Otter has a long-term capital gain of $15,000 and makes distributions to Ellie and Linda of $25,000 each. Required: Discuss the impact of this information on the taxable income of Otter, Ellie, and Linda if Otter is:
Dave and his friend Stewart each owns 50 percent of KBS. During the year, Dave receives $75,000 compensation for services he performs for KBS during the year. He performed a significant amount of work for the entity, and he was heavily involved in management decisions for the entity (he was not a passive investor in KBS). After deducting Dave's compensation, KBS reports taxable income of $30,000. How much FICA and/or self-employment tax is Dave required to pay on his compensation and his share of the KBS income if KBS is formed as a C corporation, an S corporation, or a limited liability company (taxed as a partnership) (ignore the 0.9 percent additional Medicare tax)? (Do not round any percentage calculations. Round other intermediate calculations and final answers to the nearest whole dollar amount.) C Corporation S Corporation Limited liability company