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

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
Hector is in the 32% tax bracket. He acquired 10,000 shares of stock in Eclipse Corporation three years ago at a cost of $100 per share. In the current year, Hector received a payment of $225,000 from Edlipse Corporation in exchange for 2,000 of his shares in Eclipse. Eclipse has E & P of $975,000. Hector has a capital loss carryover of $50,000 in the current tax year. Assume that Hector has no other capital gain transactions during the year. Taxpayers in the 32% tax bracket are subject to the long-term capital gains and qualified dividends tax rate of 15%. What amount of the capital loss may Hector deduct in the current year in the following situations? If an amount is zero, enter "0". a. The $225,000 payment from Eclipse Corporation is a qualifying stock redemption for tax purposes. Hector may use $ 25,000 of the capital loss carryover to offset the gain on the redemption. His income tax liability is 8,000 b. The $225,000 payment from Eclipse Corporation does not qualify as a stock…
After several years of profitable operations, Javell, the sole shareholder of JBD Inc., a C corporation, sold 22 percent of her JBD stock to ZNO Inc., a C corporation in a similar industry. During the current year, JBD reports $1,200,000 of after-tax income. JBD distributes all of its after-tax earnings to its two shareholders in proportion to their shareholdings. How much tax will ZNO pay on the dividend it receives from JBD? What is ZNO's tax rate on the dividend income (after considering the DRD)? [Hint. See IRC $243.] (Round the "Tax rate on dividend income" to 2 decimal places.) ZNO's tax on dividend received ZNO's tax rate on dividend income % www.oboocess
Help please
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.
Vala
At her death, Chow owned 55% of the stock in Finch Corporation, with the balance held by family members. In the past five years, Finch has earned average net profits of $1,740,000, and on the date of Chow's death, the book value of its stock is $4,350,000. An appropriate rate of return for Finch’s business is in is 5.9%. What value would the IRS argue that the stock Chow owned should be included in her estate?
Dave and his friend Stewart each owns 50 percent of KBS. During the year, Dave received $86,000 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 $34,400. 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
Jessica is a one-third owner in Bikes-R-Us, an S corporation that experienced a $45,000 loss this year (year 1). Assume her stock basis is $10,000 at the beginning of the year and that at the beginning of year 1 Jessica loaned Bikes-R-Us $3,000. In year 2, Bikes-R-Us reported ordinary income of $12,000. (Leave no answer blank. Enter zero if applicable.) Required: What amount is Jessica allowed to deduct in year 1 and year 2? What are her stock and debt bases in the corporation at the end of year 1? What are her stock and debt bases in the corporation at the end of year 2? Year 1 Year 2 a. Deductible amount b-c. Stock basis Debt basis