Rosa contributes $50,000 to a business entity in exchange for a 10% ownership interest. Rosa materially participates in the entity. Theentity incursloss of $900,000 for the current tax year; it holds liabilities of $700,000 at the end of the year. Of this amount, $150,000 isrecourse debt and $550,000 is nonrecourse debt.If an amount is zero, enter "0".a. Assume that the business entity is a partnership.How much of the entity loss can Rosa deduct on her the current tax year income tax return?$50,000 XWhat is her basis for the partnership interest at the end of the current tax year?0 XFeedback✓ Check My WorkUnder the conduit concept, the entity is viewed as merely an extension of the owners. Under the entity concept, the entity is regarded as beingseparate and distinct from its owners.b. Assume that the business entity is a C corporation.How much of the entity loss can Rosa deduct on her the current tax year income tax return?$55,000 XWhat is her basis for the stock at the end of the current tax year?0 XFeedbackCheck My WorkIncorrect

It is an agreement between two or more parties to conduct the business and share the profits and…

Answered: Rosa contributes $50,000 to a business…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Prime Corp. is an accrual basis, calendar year C corporation. Its current year reported book income before federal income taxes was $300,000, which included $17,000 corporate bond interest income. A $20,000 expense for term life insurance premiums on corporate officers was incurred. Prime was the policy owner and beneficiary. What was Prime's current year taxable income as reconciled on Prime's Schedule M-1, Reconciliation of Income (Loss) per Books With Income per Return, of Form 1120, U.S. Corporation Income Tax Return? A. $320,000 B. $300,000 C. $283,000 D. $280,000
On January 1, 2020, Leo paid $15,000 for 5 percent of the stock in BLS, an S corporation. In November, he loaned $8,000 to BLS in return for a promissory note. BLS generated a $600,000 operating loss in 2020. BLS generated $220,000 ordinary business income in 2020. In 2022, BLS repaid its $8,000 debt to Leo before he restored any basis in the debt. A) How much gain or loss, if any, will Leo recognize as a result of the debt repayment?
Lorissa owes Waterbury State Bank $200,000. During the current year, she isunable to make the required payments on the loan and negotiates the followingterms to extinguish the debt. Lorissa transfers to Waterbury ownership ofinvestment property with a value of $90,000 and a basis of $55,000, and commonstock with a value of $50,000 and a basis of $70,000. Lorissa also pays Waterbury$5,000 cash, and Waterbury forgives the remaining amount of debt. Before theagreement, Lorissa's assets are $290,000, and her liabilities are $440,000.Determine how much gross income Lorissa has from the extinguishment of the debt.
This year, Faro, Incorporated, a calendar year taxpayer, issued 500 shares of its publicly traded stock as a bonus to its employee, Darius. On the date of issuance, the stock's fair market value was $17,600. Required: a. What are the tax consequences to Darius and Faro if Darius's ownership of the stock was fully vested on the date of issuance (the stock was transferable and not subject to risk of forfeiture). b. What are the tax consequences to Darius and Faro if the terms of the bonus require that Darius must hold the stock five years from the date of issuance. If employment is terminated before that date, the stock must be forfeited back to Faro. Darius made no election with respect to the restricted stock. Complete this question by entering your answers in the tabs below. Required A Required B ces What are the tax consequences to Darius and Faro if Darius's ownership of the stock was fully vested on the date of issuance (the stock was transferable and not subject to risk of…
1. George operates a business that generated revenues of $50 million and allocable taxable income of $560,000. Included in the computation of allocable taxable income were $900,000 of business interest expense, $20,000 of business interest income, and $180,000 of depreciation. What is the maximum business interest deduction that George will be eligible to claim this year if the business does not qualify under the gross income test? a) $168,000 b) $560,000 c) $612,000 d) $452,000 2. Mike started a calendar-year business on September 1stSeptember 1st of this year by paying 12 months of rent on his shop at $550 per month. What is the maximum amount of rent that Mike can deduct this year under each type of accounting method? a) $6,600 under the cash method and $6,600 under the accrual method b) $6,600 under the cash method and $2,200 under the accrual method c) $2,200 under the cash method and $2,200 under the accrual method d) $2,200 under the cash method and zero under the…
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Connie recently provided legal services to the Winterhaven LLC and received a 20 percent interest in the LLC as compensation. Winterhaven currently has $50,000 of accounts payable and no other debt. The current fair market value of Winterhaven’s capital is $200,000. If Connie receives a 20 percent profits interest only, how much income must she report?
8. 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.) What is Sam’s tax basis in the stock he receives in return for his contribution of property to the corporation?

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