Tomato Corporation owns a building with a basis of $40,000 that is subject to a debt of $160,000. The FMV of the building is $100,000. Tomato distributes the property in a nonliquidating distribution (along with the debt) to Mitch, its sole shareholder. What is the amount of the distribution to Mitch? a. $80,000. b. $50,000. c. zero. d. $30,000. e. none of the above.
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- Casey transfers property with a tax basis of $2,180 and a fair market value of $6,100 to a corporation in exchange for stock with a fair market value of $4,500 and $575 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $1,025 on the property transferred. Casey also incurred selling expenses of $391. What is the amount realized by Casey in the exchange?B20. Your client, James, is the 100% owner Best Corporation, Inc., a C Corporation. James wants to sell a building he owns to Best Corporation for its fair market value (FMV) of $100,000. The property’s adjusted basis is $150,000. James asks you if he will be able to deduct the $50,000 loss on the property if he sells it to Best. Can James recognize the loss? a. Yes, because it is being sold at its FMV. b. Yes, because individuals and corporations are never considered elated parties for purposes of loss disallowance. c. No, because James and Best are considered related parties for purposes of loss disallowance under IRC 267. d. No, because James and Best are considered related parties for purposes of loss disallowance under IRC 318. e. No, not unless James and Best sign an agreement stating that the sale is bona fide. If they do so, James will be allowed to deduct the loss.Ramon incorporated his sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation's stock. The property transferred to the corporation had the following fair market values and adjusted tax bases: Adjusted Tax FMV Basis $ 21,500 54,750 139,000 $ 9,200 47,000 Inventory Building Land 69,000 $ 215,250 $ 125,200 Total The fair market value of the corporation's stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Ramon. (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) a. What amount of gain or loss does Ramon realize on the transfer of the property to his corporation? Gain or loss realized
- 1 An S corporation distributes land with a basis of $60,000 and a FMV of $90,000 to its sole shareholder. The tax results of the distribution will be Group of answer choices no gain recognized by the corporation but $30,000 of gain recognized by the shareholder. no gain to the corporation or to the shareholder. $30,000 of gain recognized by the S corporation and no pass-through to the shareholder. $30,000 of gain recognized by the S corporation which is passed through to the shareholder.Abel Corp., an S corp., distributes property to a shareholder named Jay. Immediately before the distribution, the basis of Jay's investment in Abel Corp. totaled $31,000. Additional information follows: Adjusted basis of the property at the distribution date: $20,000 FMV of the property at the distribution date: $19,000 a. What is Jay's basis in his stock investment after the distribution? b. What is Jay's basis in the property after the distribution? c. What amount of loss would Abel Corp. recognize as a result of the distribution?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
- N Corporation has E&P of $400,000. It distributes land with a fair market value of $180,000 (adjusted basis of $125,000) to its sole shareholder, Rory. The land is subject to a liability of $155,000 that Rory assumes. Rory has what amount for a taxable dividend: A taxable dividend of $15,000 A taxable dividend of $25,000 A taxable dividend of $55,000 A taxable dividend of $180,000 A taxable dividend of $400,000 The distribution of land will not result in a taxable event for RoryOn January 2, Chaz transfers cash of $165,800 to a newly formed corporation for 100% of the stock. In its initial year, the corporation has net income of $41,450. The income is credited to the earnings and profits account of the corporation. The corporation distributes $12,435 to Chaz. If an amount is zero, enter "0". a. How do Chaz and the corporation treat the $12,435 distribution? Chaz has a of $ and the corporation has a deduction of $ b. Assume, instead, that Chaz transfers to the corporation cash of $82,900 for stock and cash of $82,900 for a note of the same amount. The note is payable in equal annual installments of $8,290 and bears interest at the rate of 6%. No distributions are made during the year to Chaz. However, at the end of the year, the corporation pays an amount to meet the loan obligation (i.e., the annual $8,290 principal payment plus the interest due). Determine the total amount of the payment and its tax treatment to Chaz and the corporation. The corporate…Zhang incorporated her sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation's stock. The property transferred to the corporation had the following fair market values and adjusted tax bases: Inventory Building Land Total FMV $ 20,000 150,000 230,000 Adjusted Tax Basis $ 10,000 100,000 300,000 $ 400,000 $ 410,000 The corporation also assumed a mortgage of $100,000 attached to the building and land. The fair market value of the corporation's stock received in the exchange was $300,000. The transaction met the requirements to be tax-deferred under §351. Note: Negative amount should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable. Required: a. What amount of gain or loss does Zhang realize on the transfer of the property to the corporation? b. What amount of gain or loss does Zhang recognize on the transfer of the property to the corporation? c. What is Zhang's tax basis in the stock…
- In the current year, Pearl Corporation has $30,000 of current and accumulated E&P. On June 3, Pearl Corporation distributes a parcel of land (a capital asset) worth $120,000 to Betty, a shareholder. The land has a $70,000 adjusted basis to Pearl Corporation and is subject to a $16,000 mortgage, which Betty assumes. Betty’s basis in her Pearl Corporation stock is $10,000 (Ignore any tax effects on E&P). What is Betty's holding period in the land?A corporation sells property (basis of $750,000) to its sole shareholder for $450,000, the fair market value of the property. With respect to the sale: MPC Corporation makes a property distribution on 12/31/16 to its sole shareholder, Jon. The property distributed is a house (fair market value of $400,000; basis of $300,000) that is subject to a $150,000 mortgage that Jon assumes. Before considering the consequences of the distribution, MPC’s current E & P before the distribution is $175,000 and its accumulated E & P is $100,000. MPC makes no other distributions during the current year. What is MPCs taxable gain on the distribution of the house? What is MPC’s current E&P after the distribution on 12/31/16? What is Jon’s taxable gain (if any) and what type of gain is it? What is Jon’s basis in the house?Zhang incorporated her sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation's stock. The property transferred to the corporation had the following fair market values and adjusted tax bases: Adjusted Tax FMV Basis $ 56,000 420,000 $ 28,000 280,000 840,000 $ 1,148,000 Inventory Building 644,000 $ 1,120,000 Land Total The corporation also assumed a mortgage of $100,000 attached to the building and land. The fair market value of the corporation's stock received in the exchange was $1,020,000. The transaction met the requirements to be tax-deferred under §351. (Negative amount should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.) Assume the corporation assumed a mortgage of $1,220,000 attached to the building and land. Assume the fair market value of the building is now $700,000 and the fair market value of the land is $1,484,000. The fair market value of the stock remains…
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