Sh8 !Required information[The following information applies to the questions displayed below.]Mustafa, Mickayla, and Taylor are starting a new business (MMT). To get the businessstarted, Mustafa is contributing $260,000 for a 40 percent ownership interest, Mickaylais contributing a building with a value of $260,000 and a tax basis of $165,000 for a 40percent ownership interest, and Taylor is contributing legal services for a 20 percentownership interest. What amount of gain or income is each owner required to recognizeunder each of the following alternative situations? [Hint. Look at $351 and $721.]Note: Leave no answer blank. Enter zero if applicable.a. MMT is formed as a C corporation.Gain or income to be recognizedMustafaMickaylaTaylor

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CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter13: Choice Of Business Entity—general Tax And Nontax Factors/formation

Section: Chapter Questions

Problem 51P

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Mickey, Mickayla, and Taylor are starting a new business (MMT). To get the business started, Mickey is contributing $215,000 for a 40 percent ownership interest, Mickayla is contributing a building with a value of $215,000 and a tax basis of $153,750 for a 40 percent ownership interest, and Taylor is contributing legal services for a 20 percent ownership interest. What amount of gain is each owner required to recognize under each of the following alternative situations? [Hint: Look at IRC §351 and §721.] A. MMT is formed as a C corporation. B. MMT is formed as an S corporation. C. MMT is formed as an LLC.
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6.Matthew and Venice decide to form their new retail business as an LLC. Each will receive an equal profits (loss) interest by contributing cash, property, or both. In addition to the members' contributions, their LLC will obtain a $35,000 nonrecourse loan from Simple Bank at the time it is formed. Matthew contributes cash of $4,000 and a building he bought as a storefront for the retail. The building has an FMV of $65,000 and an adjusted basis of $29,000 and is secured by a $34,000 nonrecourse mortgage that the LLC will assume. What is Matthew's outside tax basis in his LLC interest? Show computation.
Colin owns and operates Colin's Creative Coaching (3C), a sole proprietorship. 3C sponsors a 401(k)/ profit-sharing plan. Colin had net income of $200,000 and paid self-employment taxes of $20,000 (assumed) during the year. Assuming Colin is over the age of 50, what is the maximum amount that Colin and his company can contribute on his behalf to the plan for 2020? a. $25,000. b. $57,000. C. $63,500. d. $64,000.
Check my work Wozniacki and Wilcox form Jewel LLC, with each investor receiving a one-half interest in the capital and profits of the LLC. Wozniacki receives his one-half interest as compensation for tax planning services that he rendered prior to the formation of the LLC. Wilcox contributes $50,000 cash. The value of a one-half capital interest in the LLC (for each of the parties) is $50,000. Compute Wozniacki’s realized and recognized gain from joining Jewel. Generally, formation of LLC is treated the same as a partnership and no gain or loss is recognized at formation. One of the exceptions to this provision is when capital interest is received as compensation for services rendered. When this happens, it is not a tax-deferred transaction because services are not treated as “property” Since Wozniacki receives his half interest in the partnership for services rendered with a FMV of $50,000, he has a realized and recognized gain of $50,000 of ordinary income…
Taylor and Tanner formed a partnership. Taylor contributed $50,000 in cash. Tanner contributed land and buildings he purchased for $50,000 some time ago. His tax basis in the property is now $30,000, although it was recently appraised for $70,000. There is a $15,000 mortgage attached to the building that the partnership will assume. What is the amount of Tanner’s capital account after his contribution? a. $50,000 b. $30,000 c. $35,000 d. $55,000
[The following information applies to the questions displayed below] Ray and Matias own 50 percent capital and profits interests in Alpine Properties LLC. Alpine builds and manages rental real estate, and Ray and Matias each work full time (over 1,000 hours per year) managing Alpine. Alpine's liabilities (at both the beginning and end of the year) consist of $1,540,000 in nonrecourse mortgages obtained from an unrelated bank and secured by various rental properties. At the beginning of the current year, Ray and Matias each had a tax basis of $250,000 in his respective LLC interest, including his share of the nonrecourse mortgage liability. Alpine's ordinary business losses for the current year totaled $608,000, and neither member is involved in other activities that generate passive income Note: Leave no answer blank. Enter zero if applicable. Problem 20-79 Part b (Algo) b. How much of each member's loss is suspended because of the at-risk limitation? Loss suspended Ray Matias
Allen, Barry, and Carl are incorporating their real estate sales partnership, which will become the ABC Corporation. Allen will contribute a building with a basis of $25,000 and a fair market value of $50,000 in return for 500 shares. Barry and Carl will each contribute $50,000 cash for 500 shares each. To retain the services of their top sales associate, Drake, they will provide 500 shares to him in return for his services. Explain the tax consequences of these transactions for each shareholder, and the corporation.
9. Angela and Thomas are planning to start a new business. Thomas will invest cash in the business but not be involved in day-to-day operations. Angela plans to work full-time overseeing business operations. The two currently project that the business will generate $200,000 of annual taxable income before consideration of any payments to Angela for her services. Both agree that Angela's services are worth $100,000 Angela and Thomas plan to form a passthrough entity but are unsure whether to choose a partnership or an S corporation. In either case, they will be equal owners of the entity. Given their other sources of income, both Thomas and Angela have a 37 percent marginal tax rate on ordinary income. (Ignore any payroll or self employment tax consequences.) a. If the business is operated as a partnership, calculate ordinary income allocated to each owner, and explain the treatment by the partnership and by Angela of her $100,000 payment for services. b. If the business is operated as…
Marlo and Merlins son, Alex, needs 20,000 to start a business. They have 30,000 in securities that they can use to give him the capital he needs. Pertinent information regarding the securities is given below: Marlo and Merlin are in the 28 percent marginal tax rate bracket; Alex is in the 15 percent marginal tax rate bracket. Neither Marlo, Merlin, nor Alex has any other capital asset transactions during the year. Alexs basis in any of the securities gifted to him will be the lesser of his parents basis or the fair market value of the security. Discuss the tax effects of alternate methods of transferring 20,000 to Alex, and devise an optimal plan for making the transfer.
Joe, June, and Jim—coworkers—decide that they want to start their own business. Joe has $200,000 to contribute, June has equipment valued at $100,000 (basis = $90,000), and Jim has real estate suitable for the business valued at $200,000 (basis = $110,000). Joe and Jim are each to receive 40 percent of the corporate stock, and June is to receive 20 percent. Joe and June transfer title to their property to the corporation immediately. When Jim tries to transfer title to the real estate to the corporation, several legal errors in the title are discovered, and he is unable to transfer title until the errors are corrected. Correcting the errors takes more than 14 months. In the meantime, the corporation begins operating, renting the building from Jim. In the 15th month, Jim is able to transfer title and receive his stock. Is Jim eligible to use the nonrecognition provisions of Section 351 on this transfer?

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