Moustapha and Ava have owned X Corp as equal shareholders for the last five years. Due to unexpected growth, X Corp needs an additional storage facility. In the current year, Moustapha contributes a parcel of land to X Corp that will be used to build this facility. Moustapha purchased the land 10 years ago for $10,000 and has held it as an investment. The land has a fair market value at the time of contribution of $100,000. Moustapha will receive additional stock in exchange for the land so that after the land contribution he will own 70% of the stock of X Corp. What are the tax consequences to Moustapha and Ava of the contribution of land? O Moustapha recognizes $90.000 of capital gain and Ava recognizes no gain O The entire $100,000 fair market value of the land is ordinary income to Moustapha: Ava has no income O Moustapha must recognize half of the $90,000 of realized gain and Ava recognizes the other half O Neither Moustapha nor Ava has any tax conscquences upon the land contribution because they together own at least 80% of the stock

Moustapha and Ava have owned X Corp as equal shareholders for the last five years. Due to unexpected growth, X Corp needs an additional storage facility. In the current year, Moustapha contributes a parcel of land to X Corp that will be used to build this facility. Moustapha purchased the land 10 years ago for $10,000 and has held it as an investment. The land has a fair market value at the time of contribution of $100,000. Moustapha will receive additional stock in exchange for the land so that after the land contribution he will own 70% of the stock of X Corp. What are the tax consequences to Moustapha and Ava of the contribution of land? O Moustapha recognizes $90.000 of capital gain and Ava recognizes no gain O The entire $100,000 fair market value of the land is ordinary income to Moustapha: Ava has no income O Moustapha must recognize half of the $90,000 of realized gain and Ava recognizes the other half O Neither Moustapha nor Ava has any tax conscquences upon the land contribution because they together own at least 80% of the stock

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

Castle and Dave formed an S corporation that is owned as follows: Castle 75% and Dave 25%. The corporation distributes an asset to each owner. The corporation has a basis of $45,000 for each asset. The fair market value of each of the assets is as follows: Castle $90,000 and Dave $50,000. a. What is the recognized gain for the corporation? b. How much of the gain does Castle report? c. How much of the gain does Dave report?
Fill in The Blanks. (See attached Image).
Van and Floyd formed a corporation during the year. In exchange for one-half of the outstanding shares of the corporation's voting stock, which had a total par value of $400, 000, Van contributed property with a fair market value of $200,000 for which he paid $300,000 in a prior year. Floyd contributed property with a fair market value of $200,000 for which he paid $100,000 in a prior year and received the other one-half of the outstanding stock. How much gain or loss will Van and Floyd recognize on the transfer of property? A. Van will recognize $100, 000 loss; Floyd will recognize $100, 000 gain. B. No gain or loss to either Van or Floyd. C. Van will recognize $0 loss; Floyd will recognize $100,000 gain. D. None of the answers are correct.
Yager Corporation purchased residential real estate several years ago for $225,000, of which $50,000 was allocated to the land and $175,000 was allocated to the building. Yager took straight-line MACRS deductions of $40,000 during the years it held the property. In the current year, Yager sells the property for $275,000, of which $55,000 is allocated to the land and $220,000 is allocated to the building. Requirement What are the amount and character of Yager's recognized gain or loss on the sale? Begin by computing the gain or loss on sale. Select the formula and then enter the amounts and compute the gain or loss on the sale for the land, building and for the total Land Building Total Recognized gain Next, determine the character of the gain or loss on sale of the land and building. (Complete all input fields. For items with a 0 balance, make sure to enter a 0 in the appropriate cell.) Building Total Land Recognized gain or loss
To acquire a 1/3 interest in the T LLC (a partnership), on January 1 of this year D contributed some land he held for investment. He purchased the land for $120,000. Unfortunately, the land decreased in value and was only worth $90,000 on the date of contribution. A few years later, T LLC sells the land for $84,000. At the beginning of that year, D's capital account was $200,000. Compute the gain or loss to T LLC when it sold the land_____________________ Compute the capital account for D immediately after the sale________________
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…
Ramona and Hermione formed Wiley Corporation on January 2. Ramona contributed cash of $235,000 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 Adjusted Tax Basis Building $ 88, 125 $ 23,500 Land 205, 625 94, 000 Total $ 293,750 $ 117,500 To equalize the exchange, Wiley Corporation paid Hermione $58, 750 in addition to her stock. d. What is Hermione's tax basis in the stock received in return for the contribution of property to the corporation? e. What adjusted tax basis does Wiley Corporation take in the land and building received from Hermione? f. Assume Hermione's adjusted tax basis in the land was $235,000. What amount of gain or loss does Hermione realize on the formation of the corporation? What amount, if any, does she recognize? G. Assume Hermione's adjusted tax basis in the land was $235,000. What adjusted tax basis…
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?
The stock in Toucan Corporation is held equally by two brothers. Four years ago, the shareholders transferred property (basis of $200,000, fair market value of $220,000) to Toucan Corporation as a contribution to capital. In the current year and pursuant to a complete liquidation of Toucan, the property is distributed proportionately to the brothers. At the time of the distribution, the property had a fair market value of $40,000. What amount of loss will Toucan Corporation recognize on the distribution of the property? Oa. $160,000 Ob. $0 Oc. $20,000 Od. $180,000
Ramona and Hermione formed Wiley Corporation on January 2. Ramona contributed cash of $ 215,000 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 Adjusted Tax Basis Building $ 80,625 $ 21, 500 Land 188, 125 86,000 Total $ 268, 750 $ 107,500 To equalize the exchange, Wiley Corporation paid Hermione $53, 750 in addition to her stock. e. What adjusted tax basis does Wiley Corporation take in the land and building received from Hermione?
Help me with proper explanation
Josh has investments in two activities, these are his only two investments. Josh materially participates in Activity A (acquired three years ago). Activity A has $10.000 basis at the beginning of the year and produces a loss of $30,000 this year. Activity B is a passive activity for Josh. Activity B (acquired two years ago) has an $80,000 basis at the beginning of the year and produces a loss of $50,000. Neither activity is a publicly traded partnership. Josh has $100,000 of wage income. What is the total amount of Josh's suspended losses for the year? (enter whole dollars only, no minus sign (-) no dollar signs ($). no commas (.), or any other marks.)