Julio acquired 2,000 shares of stock in Gray Corporation seven years ago at a cost of $50 per share. In the current year, Julio received a payment of $150,000 from Gray Corporation in exchange for 1,000 of his shares in Gray. Gray has E & P of $1,000,000. Julio takes a capital loss carryover of $50,000 into the current tax year. Julio records no other capital gain transactions during the year. Assume that Julio is in the 32% tax bracket and is subject to the long-term capital gains and qualified dividends tax rate of 15%. What amount of the capital loss may Julio deduct in the current year in the following situations? What is his income tax liability? a. The payment from Gray Corporation is a qualifying stock redemption for tax purposes. Julio may use s of the capital loss carryover to offset the gain on the redemption. His income tax liability is b. The payment from Gray is a nonqualified stock redemption for tax purposes. Julio could deduct t of the $50,000 capital loss carryover. His income tax liability is s c. If Julio had the flexibility to structure the transaction as described, which form would he choose to receive the greatest tax benefit? The qualifying stock redemption.

Julio acquired 2,000 shares of stock in Gray Corporation seven years ago at a cost of $50 per share. In the current year, Julio received a payment of $150,000 from Gray Corporation in exchange for 1,000 of his shares in Gray. Gray has E & P of $1,000,000. Julio takes a capital loss carryover of $50,000 into the current tax year. Julio records no other capital gain transactions during the year. Assume that Julio is in the 32% tax bracket and is subject to the long-term capital gains and qualified dividends tax rate of 15%. What amount of the capital loss may Julio deduct in the current year in the following situations? What is his income tax liability? a. The payment from Gray Corporation is a qualifying stock redemption for tax purposes. Julio may use s of the capital loss carryover to offset the gain on the redemption. His income tax liability is b. The payment from Gray is a nonqualified stock redemption for tax purposes. Julio could deduct t of the $50,000 capital loss carryover. His income tax liability is s c. If Julio had the flexibility to structure the transaction as described, which form would he choose to receive the greatest tax benefit? The qualifying stock redemption.

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

Mason (single) is a 50 percent shareholder in Angels Corporation (an S Corporation). Mason receives a $180,000 salary working full time for Angels Corporation. Angels Corporation reported $400,000 of taxable business income for the year (2022). Before considering his business income allocation from Angels and the self-employment tax deduction (if any), Mason's adjusted gross income is $180,000 (all salary from Angels Corporation). Mason claims $50,000 in itemized deductions. Answer the following questions for Mason. Note: Leave no answer blank. Enter zero if applicable. c. Assume the same facts as question (b), except that Angels Corporation reported $150,000 of taxable business income for the year. What is Mason's deduction for qualified business income? Ignore the wage-based limitation when computing the deduction. Answer is complete but not entirely correct. Deduction for qualified business income $ 1,200 X
Jackson is the sole owner of JJJ Corporation (an S corporation). At the beginning of 2022, Jackson's basis in his JJJ stock was $8,000. For 2022, JJJ reported a ($30,000) ordinary business loss (not a passive loss) and $4,000 of long-term capital gains. Assuming Jackson's tax basis and his at-risk amount are the same, what is Jackson's stock basis at the end of the year and how much of the ordinary business loss is he allowed to deduct in 2022?
Farell is a member of Sierra Vista LLC. Although Sierra Vista is involved in a number of different business ventures, it is not currently involved in real estate either as an investor or as a developer. On January 1, year 1, Farell has a $199,000 tax basis in his LLC interest that includes his $179,000 share of Sierra Vista's general liabilities. By the end of the year, Farell's share of Sierra Vista's general liabilities have increased to $199,000. Because of the time he spends in other endeavors, Farell does not materially participate in Sierra Vista. His share of the Sierra Vista losses for year 1 is $238,000. As a partner in the Riverwoods Partnership, he also has year 1, Schedule K-1 passive income of $18,000. Farell is single and has no other sources of business income or loss. a-1. Determine how much of the Sierra Vista loss Farell will currently be able to deduct on his tax return for year 1. a-2. List the losses suspended due to tax-basis, at-risk, and passive activity…
Aaron, an individual taxpayer in the 28% tax bracket, acquired stock in AB Corporation 5 years ago for $2,000. AB Corp. redeemed all Aaron's shares for $3,000 in 2016. (a) What is Aaron's tax liability from this transaction if it qualifies for a sale or exchange treatment? (b) What is Aaron's tax liability from this transaction if it qualifies for a dividend treatment?
Mason (single) is a 50 percent shareholder in Angels Corp. (an S Corporation). Mason receives a $182,000 salary working full time for Angels Corp. Angels Corp. reported $408,000 of taxable business income for the year (2020). Before considering his business income allocation from Angels and the self-employment tax deduction (if any), Mason's adjusted gross income is $182,000 (all salary from Angels Corp.). Answer the following questions for Mason. (Leave no answer blank. Enter zero if applicable.) b. What is Mason's net investment income tax liability (assume no investment expenses)?
[The following information applies to the questions displayed below.] Ken is 63 years old and unmarried. He retired at age 55 when he sold his business, Understock.com. Though Ken is retired, he is still very active. Ken reported the following financial information this year. Assume Ken files as a single taxpayer. Ken won $1,260 in an illegal game of poker (the game was played in Utah, where gambling is illegal). Ken sold 1,060 shares of stock for $32 a share. He inherited the stock two years ago. His tax basis (or investment) in the stock was $31 per share. Ken received $25,600 from an annuity he purchased eight years ago. He purchased the annuity, to be paid annually for 20 years, for $215,040. Ken received $13,150 in disability benefits for the year. He purchased the disability insurance policy last year. Ken decided to go back to school to learn about European history. He received a $560 cash scholarship to attend. He used $330 to pay for his books and tuition, and he applied the…
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?
please help me
Bob, a CPA, earns $200,000 from his accounting practice in the current year. He receives $25,000 in dividends and interest during the year as well as $10,000 of income from a passive activity. In addition, he incurs a loss of $65,000 from an investment in a passive activity, a $15,000 loss from a nonpassive activity ($10,000 at-risk basis), and a short-term capital loss of $20,000. What is Bob's AGI for the current year? 190,000 207,000 212,000 235,000
Farell is a member of Sierra Vista LLC. Although Sierra Vista is involved in a number of different business ventures, it is not currently involved in real estate either as an investor or as a developer. On January 1, year 1, Farell has a $126,000 tax basis in his LLC interest that includes his $115,000 share of Sierra Vista's general liabilities. By the end of the year, Farell's share of Sierra Vista's general liabilities have increased to $126,000. Because of the time he spends in other endeavors, Farell does not materially participate in Sierra Vista. His share of the Sierra Vista losses for year 1 is $153,000. As a partner in the Riverwoods Partnership, he also has year 1, Schedule K-1 passive income of $7,000. Farell is single and has no other sources of business income or loss. D. Assuming the original facts and that Farell is deemed to be an active participant in Sierra Vista, and he also has a $272,000 loss from a sole proprietorship, determine how much total trade or business…
In Year 11, Gearty, a single taxpayer, sold the following stocks: 1) Stock in A Corp. that he purchased on July 14, Year 1, for $40,000. 2) Stock in B Corp. that he purchased on July 11, Year 2, for $97,000. 3) Stock in C Corp. that he purchased on December 10, Year 10, for $15,000. 4) Stock that Gearty inherited from his mother, who died on January 5, Year 11. Her basis was $10,000 and the fair market value at her death was $27,000. She had acquired the stock on January 3, Year 11. The alternative valuation date was not elected on her estate. 5) Stock that Gearty received as a gift in Year 5. The donor’s basis was $25,000 and the fair market value at the date of the gift was $20,000. The donor had owned the stock for several years. In column B, select from the option list to indicate whether the gain or loss from the sale is "short-term" or "long-term." In column C, select from the option list to indicate whether the sale results in a "gain" or a…
AAA sold shares of a qualified small business corporation on August 29, 2021. He realized a capital gain of $64,000 on the sale. AAA has never claimed a capital gains deduction, he has never realized an allowable business investment loss and has no cumulative net investment loss. His only net/allowable capital loss claimed since 1985 is a net capital loss of $11,000 that he plans to claim in 2021 to offset the taxable capital gain on this share sale. What is the capital gains deduction available to AAA on the sale of these shares?