Missy owns all 100 shares of SandCorporation stock having a $1.15 million FMV.Her basis in the stock is $450,000. Sand'sE&Pbalance is $700,000. Peter would like topurchase the stock but wants only thecorporation's non-cash assets valued at$850,000. Peter is willing to pay $850,000 forthese assets.How would your answer to Part a change (ifat all) if Sand first redeems 25 shares of Missy's stock for $300,000 and then Peterpurchases the remaining 75 shares from Missyfor $850,000?Missy will recognizeofon her sale of 75 sharos of Sand Corporation stock to Peter.She will recognize an additional ofJon the redemption of her remaining shares by Sand.

Solution- It meets the second criterio so the redeemption will be treated as sale-…

Missy owns all 100 shares of Sand Corporation stock having a $1.15 million FMV. Her basis in the stock is $450,000. Sand'sE&P balance is $700,000. Peter would like to purchase the stock but wants only the corporation's non-cash assets valued at $850,000. Peter is willing to pay $850,000 for these assets.

Missy owns all 100 shares of Sand Corporation stock having a $1.15 million FMV. Her basis in the stock is $450,000. Sand'sE&P balance is $700,000. Peter would like to purchase the stock but wants only the corporation's non-cash assets valued at $850,000. Peter is willing to pay $850,000 for these assets.

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

Mr. Boyd and Ms. Tuck decide to form a new corporation named BT Inc. Mr. Boyd transfers $20,000 cash, equipment (FMV $40,000; adjusted tax basis $41,500), and business inventory ($20,000 FMV; adjusted tax basis $12,000), and Ms. Tuck drafts the legal documents and designs the accounting system for B, valued at $20,000. BT issues 1,000 shares of common stock to its two shareholders. 1. Compute Mr. Boyd's realized and recognized gain on his exchange of property for stock, and determine his tax basis in his BT common shares.
We have the following facts: The three below meet on January 2, 2021 and decide the following will happen as one transaction (even though not all on the same day) Emily exchanges land for 100 shares of ABC Inc on January 7, 2021. She has a basis of $10,000 and FMV of $100,000 David transfers cash for 10 shares on January 13, 2021. His basis and FMV are both $10,000 On February 10, 2021, Ethan agrees to exchange services during the next year for 100 shares of stock. They all agree that the services will be worth $100,000 QUESTION: Does this qualify as a $351 transaction? O a. No, Ethan's services taint the whole thing O b. Yes at Emily but no to David (he was after Emily and so no control) and no to Ethan for services O c. Yes, the three met at one time and all agreed to create the entity. So part of a prearranged plan O d. Yes as to Emily as she had control immediately after her transaction e. Yes as to Emily and David as they transferred property
Jay owns 100% of Kaye Company. Jay (an individual) is in the 37% tax bracket. Assume that Kaye Company is a corporation and distributes $50,000 cash to Jay as a dividend. How much tax must Jay pay on this $50,000 dividend?
William owns 200 shares of Data General stock. He purchased the stock for $20 a share. He sold her stock for $25 a share. The commissions required to buy and sell his stock totaled $130. Assuming that He received no dividends during the time she owned the stock, what is his total return for this transaction?
On December 12, 2020, Jack contributed a painting to Kyle, LLC that was valued at $100,000 (basis of $5,000) in exchange for a 50% capital and profits interest in the LLC. Josh contributed $100,000 in cash and received a 50% interest in the LLC. On December31, Jack withdrew $50,000 in cash from the LLC and then on January 17, 2021, Josh purchased Jack's entire interest in the LLC for $50,000 and the partnership distributed the painting to Josh on February 15, 2021. What adjustments if any might the IRS make? Explain the consequences of such an adjustment to Josh & Jack and how this could have been prevented.
14. Sam and Devon agree to go into business together selling college-licensed clothing. According to the agreement, Sam will contribute inventory valued at $100,000 in return for 80 percent of the stock in the corporation. Sam’s tax basis in the inventory is $60,000. 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 $25,000. (Negative amounts 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. 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.)
Jack exchanges property worth $100,000 ($30,000 basis) for 70% of the stock. Janet owned 100% of the company before the company transferred 70% to Jack for his property. Immediately after the transfer, Jack and Janet own 100% of the company. This is a 351 since they have more than 80 percent control. Select one: O True False
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?
Chris invests land and building worth $100k and $400k. Crown invests cash and inventory at $70k and $30k. They agree to have equal shares. How would you record it under the goodwill and bonus method?
Comet Company is owned equally by Pat and his sister Pam, each of whom holds 100 shares in the company. Pam wants to reduce her ownership in the company, and it was decided that the company will redeem 50 of her shares for $1,000 per share on December 31, 2010. Pam's income tax basis in each share is $500. Comet has a total E&P of $250,000. What are the tax consequences to Pam as a result of the stock redemption? a) $25,000 capital gain and a tax basis in each of her remaining shares of $100. b) $50,000 dividend and a tax basis in each of her remaining shares of $50. c) $50,000 dividend and a tax basis in each of her remaining shares of $100. d) $25,000 capital gain and a tax basis in each of her remaining shares of $500. Kay owns XYZ Corporation stock with a basis of $20,000. She exchanges this for $24,000 of ABC stock and $8,000 of ABC securities as part of a tax-free reorganization. What is Kay's realized gain?
please provide explanation: Ron owns 1,000 shares of Juno Corporation common stock which he purchased in 20X6 for $12.000. On 5-30-20X9 he purchases an additional 300 shares for $2,000. On 6-20-20X9 he sells the original 1,000shares for $8,000. On 7-15-20X9 he purchases 450 shares of Juno stock for $5.000. What is Ron's recognized gain or loss as a result of the sale of the stock and what is the basis for the shares purchased on 7-15-20X9, respectively?a. $1,000 loss; $6,200 basisb. $3,000 loss; $6,800 basisc. $4,000 loss; $5,000 basisd. $1,000 loss; $6,800 basise. None of the answers provided is correct.
Marie and Ramesh form Roundtree Corporation with the transfer of the following. Marie performs personal services for the corporation with a fair market value of $190,800 in exchange for 400 shares of stock. Ramesh contributes an installment note receivable (basis $25,000; fair market value $30,000), land (basis $50,000; fair market value $170,000), and inventory (basis $450,560; fair market value $563,200) in exchange for 1,600 shares. Determine Marie and Ramesh's current income, gain, or loss and calculate the basis that each takes in the Roundtree stock. If an amount is zero, enter "0". Marie has income of $ of stock. Ramesh has income of $ and $ and $ basis in her 400 shares basis in his 1,600 shares of stock.