Hayden owns 100% of the shares of ABC Co. Hayden's spouse owns 100% of the shares of XYZ Co. The shares of ABC Co. are valued at $50,000 with an ACB and PUC of $1000.The couple planning for XYZ Co. to pay Hayden $50,000 in cash for the shares in ABC Co. Which of the following will result from this sale?Multiple ChoiceHayden will recognize a capital gain of $49,000.Hayden will recognize a deemed dividend of $50,000 and a capital gain of $0.Hayden will recognize a deemed dividend of $49,000 and a capital gain of $0.Hayden will recognize a capital gain of $50,000.

Subsection 55(2) within the Income Tax Act serves as a provision aimed at preventing tax avoidance.…

Multiple Choice O Hayden will recognize a capital gain of $49,000. Hayden will recognize a deemed dividend of $50,000 and a capital gain of $0. Hayden will recognize a deemed dividend of $49,000 and a capital gain of $0. O Hayden will recognize a capital gain of $50,000.

Multiple Choice O Hayden will recognize a capital gain of $49,000. Hayden will recognize a deemed dividend of $50,000 and a capital gain of $0. Hayden will recognize a deemed dividend of $49,000 and a capital gain of $0. O Hayden will recognize a capital gain of $50,000.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Gordon transfers a building with a $200,000 market value. $100,000 basis in addition to a $110,000…

A: A non-recourse loan is one for which the borrower is not personally liable for repayment. The…

Q: 2 A transfers land to Newco in exchange for 100% of Newco's stock The land has a basis of $50, FMV…

A: Financial Management: Financial management comprises of two words i.e. Finance and management.…

Q: Company B and Firm W exchanged the following business real estate: FMV Mortgage Equity Required:…

A: Exchange transactionsThe company purchasing one product or asset by selling another asset or product…

Q: Problem 10-27 (Algorithmic) (LO. 3, 9, 14) Kenisha and Shawna form the equal KS LLC, with a cash…

A: A) Loss = Adjusted basis - fair market value value = 474,600 - 452,000…

Q: Sunny receives a property distribution from Cloudy Corp. The distributed property had a FMV of…

A: The gain to Cloudy Corp is the excess of the fair market value (FMV) over the adjusted basis of…

Q: 9. Terry transfers two assets to a partnership on the day it's created for a 60% partnership…

A: Since you have posted multiple questions, we will provide the solution only to the first question as…

Q: Steven received divI

A: Dividends can be a great way to earn an income stream from your investments, but, like all income,…

Q: Use 2022 tax rules

A: To prepare Blue Bell's page 1 and Schedule K for its Form 1065, along with Schedule K-1 for Deanne,…

Q: Non-Cash Assets recorded in the accounting records as $30 sold for $50 during the liquidation…

A: Given that: Non-Cash Assets recorded in the accounting records as $30 sold for $50 during the…

Q: am. 104.

A: Compensation for Services:The parent's service contribution is valued at $560,750. This is a…

Q: Required information [The following Information applies to the questions displayed below] The Field,…

A: Liquidation of a partnership firm means termination of the partnership agreement and closing down…

Q: Aika and Nicole's capital is P600,000 and P480,000. Profit and share ratio is 7:3. Princess directly…

A: The partnership is an agreement between the partners to carry on the business agreed on by all or…

Q: After Non-Cash Assets have been sold and liabilities paid, the final step in the liquidation process…

A: The gains and losses are equally distributed between the partners. It indicates that A and B are…

Q: Y and Z have capital balances of $80, 000, $180,000 and $60,000 respectively. Immediately prior to…

A: Partnership refers to the act of agreement or the contractual arrangement between two or more people…

Q: Sarah transfer land with a fair market value of $25,000, to a corporation in exchange for 100…

A: The land is an asset for the company that is reported on the balance sheet of the company. The…

Q: der in each of the follow independent cases. In all cases, assume that the 80% test is met. a.…

A: The basis of a stock is the purchase price less commissions and other costs. When a security is…

Q: Carney, Pierce, Menton, and Hoehn are partners who share profits and losses on a 4:3:2:1 basis,…

A: At the time of liquidation partners will be paid according to capital balance of the partner. The…

Q: Issac and Karl are partners. Issac has a capital balance of $25,000 and Karl has a capital bala…

A: The sharing of profit and loss in accordance with the profit and loss sharing ratio.it completely…

Q: Abigail contributes land with an adjusted basis of $56,000 and a fair market value of $58,000 to…

A: The adjusted basis of an asset is the original cost of the asset, increased or decreased by various…

Q: Kevan, Jerry, and Dave formed Albee LLC. Jerry and Dave each contributed $245,000 in cash. Kevan…

A: The company's having a limited liability status is its biggest benefit as the members and owners of…

Q: What is the after tax accumulation using formaul for partnership and corperation Parameters…

A: The entire amount of wealth or money left over after taxes have been taken out of investment returns…

Q: Use the following information to complete the chart below, indicating the Calvet Trust's entity…

A: A capital gain occurs when a capital asset is traded because its value grew. A capital gain occurs…

Question

Hayden owns 100% of the shares of ABC Co. Hayden's spouse owns 100% of the shares of XYZ Co. The shares of ABC Co. are valued at $50,000 with an ACB and PUC of $1000.
The couple planning for XYZ Co. to pay Hayden $50,000 in cash for the shares in ABC Co. Which of the following will result from this sale?
Multiple Choice
Hayden will recognize a capital gain of $49,000.
Hayden will recognize a deemed dividend of $50,000 and a capital gain of $0.
Hayden will recognize a deemed dividend of $49,000 and a capital gain of $0.
Hayden will recognize a capital gain of $50,000.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction to Subsection 55(2) of the Income Tax Act

VIEW

Step 2: Explanation for Correct Option

VIEW

Step 3: Explanation for Incorrect Option

VIEW

Solution

VIEW

Step by step

Solved in 4 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

4
Tony Smith and Bill Jones buy property for $500,000. Tony and Bill organize a corporation when the property has a fair market value of $700,000. They transfer the property to the corporation for all its authorized capital stock, which has a par value of $700,000. What amount of gain is recognized by Tony? A. $0 B. $250,000 C. $500,000 D. $700,000
Corporate Organization Exercise Kathy and Carl formed a corporation by each contributing an asset with a FMV of $50,000 for half of the stock in the corporation. Prior to the transfer, Kathy had an adjusted basis of $40,000 in her asset and Carl had an adjusted basis of $60,000 in his asset. h. Does Carl have any positive or negative consequences if the corporation sells Kathy's asset for $50,000 ? Quantify the impact assuming the corporation's marginal tax rate is 21%. Answer the following assuming Carl and the corporation did not make the election i. What is Carl's realized loss on the transaction?
For Industry H, determine each partner's share of income assuming the partners agree to share income by giving a $67,700 per year salary allowance to Price, a $126,100 per year salary allowance to Waterhouse, a $113,700 per year salary allowance to Coopers, a 15% interest on their initial capital investments, and the remaining balance shared equally. (Enter all allowances as positive values. Enter losses as negative values.) Important! Be sure to click the correct Industry at the top of the dashboard. Net income (loss) Salary allowances Balance of income (loss) Interest allowances Balance of income (loss) Balance allocated equally Balance of income (loss) Shares of each partner Initial partnership investments Net income Allocation of Partnership Income Price Total net income Total 0 Waterhouse $ $ PRICE, WATERHOUSE, AND COOPERS Statement of Partners' Equity For Year Ended December 31 Price Coopers 0 0 Waterhouse 0 0 0 $ For Industry H, prepare a statement of partners' equity for the…
eBook Tax Drill - Joint Interests - Gifts Compute the amount of the gift in the following independent scenarios. If an amount is zero, enter "0". a. Bolivar and Collen purchase real estate as tenants in common. Of the $250,000 purchase price, Bolivar furnishes $200,000 and Collen furnishes only $50,000. Each is an equal owner in the property. The amount of the gift that Bolivar has made to Collen is $ 0 x. b. Ryan and Jessica-Anne are brother and sister. Ryan deposits $20,000 in a bank account under the names of Ryan and Jessica-Anne as joint tenants. Both Ryan and Jessica-Anne have the right to withdraw funds from the account without the other's consent. At the time the account is created, the amount of the gift that Ryan has made to Jessica-Anne is $ o v. Feedback V Check My Work Whether a gift results when property is transferred into some form of joint ownership depends on the consideration furnished by each of the contributing parties for the ownership interest acquired.
Visno