To operate a business, a taxpayer generally chooses between individual trading, partnership , and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances. The amount of gain that must be recognized by K.

Question

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Answer 1

Question

Chapter 11, Problem 13P

a.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of gain that must be recognized by K.

a.

Expert Solution

Answer to Problem 13P

The amount of gain that must be recognized by K is $25,000 .

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Therefore, the amount of gain that must be recognized by K is $25,000 .

b.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of basis of K in the Corporation’s stock.

b.

Expert Solution

Answer to Problem 13P

The amount of basis of K in Corporation’s stock is $0 .

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Now, the calculation of K’s basis in the corporation’s stock is as under:

Basis of the property transferred	$275,000
Less: boot received	-
Plus: gain recognized	$25,000
Less: liabilities transferred	($300,000)
Basis in the stock	$0

Therefore, the amount of gain that must be recognized by K is $0 .

c.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of Corporation’s basis in the land.

c.

Expert Solution

Answer to Problem 13P

The amount of Corporation’s basis in the land is $300,000 .

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Now, the calculation of the amount of Corporation’s basis in the land is as under:

Basis of the property transferred	$275,000
Less: boot received	-
Plus: gain recognized	$25,000
Less: liabilities transferred	-
Basis in the stock	$300,000

Therefore, the amount of the Corporation’s basis in the land is $300,000 .

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The difference between the balance in a company's cash account and its bank statement is documented in the __________ of the bank statement.

Answer 2

Question

Chapter 11, Problem 13P

a.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of gain that must be recognized by K.

a.

Expert Solution

Answer to Problem 13P

The amount of gain that must be recognized by K is $25,000 .

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Therefore, the amount of gain that must be recognized by K is $25,000 .

b.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of basis of K in the Corporation’s stock.

b.

Expert Solution

Answer to Problem 13P

The amount of basis of K in Corporation’s stock is $0 .

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Now, the calculation of K’s basis in the corporation’s stock is as under:

Basis of the property transferred	$275,000
Less: boot received	-
Plus: gain recognized	$25,000
Less: liabilities transferred	($300,000)
Basis in the stock	$0

Therefore, the amount of gain that must be recognized by K is $0 .

c.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of Corporation’s basis in the land.

c.

Expert Solution

Answer to Problem 13P

The amount of Corporation’s basis in the land is $300,000 .

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Now, the calculation of the amount of Corporation’s basis in the land is as under:

Basis of the property transferred	$275,000
Less: boot received	-
Plus: gain recognized	$25,000
Less: liabilities transferred	-
Basis in the stock	$300,000

Therefore, the amount of the Corporation’s basis in the land is $300,000 .

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Answer 3

Question

Chapter 11, Problem 13P

a.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of gain that must be recognized by K.

a.

Expert Solution

Answer to Problem 13P

The amount of gain that must be recognized by K is $25,000 .

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Therefore, the amount of gain that must be recognized by K is $25,000 .

b.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of basis of K in the Corporation’s stock.

b.

Expert Solution

Answer to Problem 13P

The amount of basis of K in Corporation’s stock is $0 .

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Now, the calculation of K’s basis in the corporation’s stock is as under:

Basis of the property transferred	$275,000
Less: boot received	-
Plus: gain recognized	$25,000
Less: liabilities transferred	($300,000)
Basis in the stock	$0

Therefore, the amount of gain that must be recognized by K is $0 .

c.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of Corporation’s basis in the land.

c.

Expert Solution

Answer to Problem 13P

The amount of Corporation’s basis in the land is $300,000 .

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Now, the calculation of the amount of Corporation’s basis in the land is as under:

Basis of the property transferred	$275,000
Less: boot received	-
Plus: gain recognized	$25,000
Less: liabilities transferred	-
Basis in the stock	$300,000

Therefore, the amount of the Corporation’s basis in the land is $300,000 .

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Answer 4

Question

Chapter 11, Problem 13P

a.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of gain that must be recognized by K.

a.

Expert Solution

Answer to Problem 13P

The amount of gain that must be recognized by K is $25,000 .

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Therefore, the amount of gain that must be recognized by K is $25,000 .

b.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of basis of K in the Corporation’s stock.

b.

Expert Solution

Answer to Problem 13P

The amount of basis of K in Corporation’s stock is $0 .

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Now, the calculation of K’s basis in the corporation’s stock is as under:

Basis of the property transferred	$275,000
Less: boot received	-
Plus: gain recognized	$25,000
Less: liabilities transferred	($300,000)
Basis in the stock	$0

Therefore, the amount of gain that must be recognized by K is $0 .

c.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of Corporation’s basis in the land.

c.

Expert Solution

Answer to Problem 13P

The amount of Corporation’s basis in the land is $300,000 .

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Now, the calculation of the amount of Corporation’s basis in the land is as under:

Basis of the property transferred	$275,000
Less: boot received	-
Plus: gain recognized	$25,000
Less: liabilities transferred	-
Basis in the stock	$300,000

Therefore, the amount of the Corporation’s basis in the land is $300,000 .

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Answer 5

Chapter 11, Problem 13P

a.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of gain that must be recognized by K.

a.

Expert Solution

Answer to Problem 13P

The amount of gain that must be recognized by K is $25,000 .

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Therefore, the amount of gain that must be recognized by K is $25,000 .

b.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of basis of K in the Corporation’s stock.

b.

Expert Solution

Answer to Problem 13P

The amount of basis of K in Corporation’s stock is $0 .

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Now, the calculation of K’s basis in the corporation’s stock is as under:

Basis of the property transferred	$275,000
Less: boot received	-
Plus: gain recognized	$25,000
Less: liabilities transferred	($300,000)
Basis in the stock	$0

Therefore, the amount of gain that must be recognized by K is $0 .

c.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of Corporation’s basis in the land.

c.

Expert Solution

Answer to Problem 13P

The amount of Corporation’s basis in the land is $300,000 .

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Now, the calculation of the amount of Corporation’s basis in the land is as under:

Basis of the property transferred	$275,000
Less: boot received	-
Plus: gain recognized	$25,000
Less: liabilities transferred	-
Basis in the stock	$300,000

Therefore, the amount of the Corporation’s basis in the land is $300,000 .

Answer 6

Chapter 11, Problem 13P

a.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of gain that must be recognized by K.

a.

Expert Solution

Answer to Problem 13P

The amount of gain that must be recognized by K is $25,000 .

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Therefore, the amount of gain that must be recognized by K is $25,000 .

Answer 7

Chapter 11, Problem 13P

a.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of gain that must be recognized by K.

Answer 8

a.

Expert Solution

Answer to Problem 13P

The amount of gain that must be recognized by K is $25,000 .

Answer 9

a.

Expert Solution

Answer 10

a.

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Therefore, the amount of gain that must be recognized by K is $25,000 .

Answer 13

b.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of basis of K in the Corporation’s stock.

b.

Expert Solution

Answer to Problem 13P

The amount of basis of K in Corporation’s stock is $0 .

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Now, the calculation of K’s basis in the corporation’s stock is as under:

Basis of the property transferred	$275,000
Less: boot received	-
Plus: gain recognized	$25,000
Less: liabilities transferred	($300,000)
Basis in the stock	$0

Therefore, the amount of gain that must be recognized by K is $0 .

Answer 14

b.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of basis of K in the Corporation’s stock.

Answer 15

b.

Expert Solution

Answer to Problem 13P

The amount of basis of K in Corporation’s stock is $0 .

Answer 16

b.

Expert Solution

Answer 17

b.

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Now, the calculation of K’s basis in the corporation’s stock is as under:

Basis of the property transferred	$275,000
Less: boot received	-
Plus: gain recognized	$25,000
Less: liabilities transferred	($300,000)
Basis in the stock	$0

Therefore, the amount of gain that must be recognized by K is $0 .

Answer 20

c.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of Corporation’s basis in the land.

c.

Expert Solution

Answer to Problem 13P

The amount of Corporation’s basis in the land is $300,000 .

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Now, the calculation of the amount of Corporation’s basis in the land is as under:

Basis of the property transferred	$275,000
Less: boot received	-
Plus: gain recognized	$25,000
Less: liabilities transferred	-
Basis in the stock	$300,000

Therefore, the amount of the Corporation’s basis in the land is $300,000 .

Answer 21

c.

To determine

Introduction: To operate a business, a taxpayer generally chooses between individual trading, partnership, and corporation form of entity. The corporations can be of either S Corporation or C Corporation. The taxpayer needs to understand his business requirements properly for the smooth continuance of his business since each form of entity has different tax treatment. After 2018, a new 21 percent rate of tax was introduced for corporations. Corporations must include in ordinary taxable income all net capital gains income during the year for tax purposes and then the income taxed at a regular rate except in certain rare circumstances.

The amount of Corporation’s basis in the land.

Answer 22

c.

Expert Solution

Answer to Problem 13P

The amount of Corporation’s basis in the land is $300,000 .

Answer 23

c.

Expert Solution

Answer 24

c.

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

Generally, if a shareholder transfers an asset to the corporation then no gain is recognized on the transfer. In cases where a transfer is done to avoid taxes or to reduce its liability, then the gain must be recognized. When a shareholder transfers an asset to the corporation then the shareholder’s basis in the stock is determined as follows:

Basis of the property transferred	$xxxx
Less: boot received	(xxxx)
Plus: gain recognized	xxxx
Less: liabilities transferred	(xxxx)
Basis in the stock	$xxxx

The basis in the property contributed to the corporation by a shareholder to which a non-recognition treatment same as the basis of property to the shareholder, increases by any gain recognized by the shareholder on the transfer.

For the given situation, K transfers land property to a corporation for a basis of $275,000 in return for the stock has a fair value of $550,000, which is subject to a liability of $300,000, in exchange for 100 percent common stock of the corporation.

So in this case gain recognized by K will be calculated as follows:

Gain=$300,000−$275,000 =$25,000

Now, the calculation of the amount of Corporation’s basis in the land is as under:

Basis of the property transferred	$275,000
Less: boot received	-
Plus: gain recognized	$25,000
Less: liabilities transferred	-
Basis in the stock	$300,000

Therefore, the amount of the Corporation’s basis in the land is $300,000 .

Answer 27

Ch. 11 - Ironwood Corporation has ordinary taxable income...Ch. 11 - Tayla Corporation generated $400,000 of taxable...Ch. 11 - Prob. 3MCQ Ch. 11 - Harrison Corporation generates capital...Ch. 11 - Prob. 5MCQ Ch. 11 - Prob. 6MCQ Ch. 11 - Prob. 7MCQ Ch. 11 - The purpose of Schedule M-1 on the corporate tax...Ch. 11 - Prob. 9MCQ Ch. 11 - Prob. 10MCQ

Answer to Problem 13P

Explanation of Solution

Answer to Problem 13P

Explanation of Solution

Answer to Problem 13P

Explanation of Solution

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