Income Tax Fundamentals 2020
38th Edition
ISBN: 9780357391129
Author: WHITTENBURG
Publisher: Cengage
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Question
Chapter 11, Problem 17MCQ
To determine
Introduction: To operate a business, a taxpayer generally chooses between individual trading,
To choose: The shareholder’s basis at the time of property transfer.
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1.
When a shareholder receives a noncash distribution of property that is encumbered by a liability (the shareholder assumes the liability on the distribution), how does the shareholder determine the amount of the distribution?
Grape Corporation makes a nonliquidating distribution of appreciated property to its shareholders.
The shareholders will report a gain.
The shareholders will report dividend income equal to the basis of the property distributed.
The corporation will report a gain.
The corporation will report dividend expense equal to the fair value of the property distributed.
when a C-Corp distributes appreciated assets to its shareholders should recognize in in the corporate return a taxable profit on the appreciation?
Chapter 11 Solutions
Income Tax Fundamentals 2020
Ch. 11 - Ironwood Corporation has ordinary taxable income...Ch. 11 - Tayla Corporation generated $400,000 of taxable...Ch. 11 - Prob. 3MCQCh. 11 - Harrison Corporation generates capital...Ch. 11 - Prob. 5MCQCh. 11 - Prob. 6MCQCh. 11 - Prob. 7MCQCh. 11 - The purpose of Schedule M-1 on the corporate tax...Ch. 11 - Prob. 9MCQCh. 11 - Prob. 10MCQ
Ch. 11 - Prob. 11MCQCh. 11 - Prob. 12MCQCh. 11 - Prob. 13MCQCh. 11 - Prob. 14MCQCh. 11 - Prob. 15MCQCh. 11 - Prob. 16MCQCh. 11 - Prob. 17MCQCh. 11 - Prob. 18MCQCh. 11 - Prob. 19MCQCh. 11 - Prob. 20MCQCh. 11 - Prob. 21MCQCh. 11 - Quince Corporation has taxable income of $485,000...Ch. 11 - Prob. 2PCh. 11 - For its current tax year, Ilex Corporation has...Ch. 11 - DeMaria Corporation, a calendar year corporation,...Ch. 11 - Fisafolia Corporation has gross income from...Ch. 11 - Prob. 6PCh. 11 - Prob. 7PCh. 11 - The Loquat Corporation has book net income of...Ch. 11 - Caloundra Corporation has book income of $ 40,000....Ch. 11 - Prob. 10PCh. 11 - Prob. 11PCh. 11 - Prob. 12PCh. 11 - Prob. 13PCh. 11 - Grevilla Corporation is a manufacturing company....Ch. 11 - Prob. 15P
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- Which of the following rights allows a shareholder of a corporation to maintain his or her proportionate interest in the corporation? Preemptive right Participation right Preferred right Cumulative right None of these.arrow_forwardWhat is a shareholder's basis in S corporation stock received for services rendered? - The average fair market value of the S corporation's stock during the time that the services were rendered. - The fair market value of the S corporation's stock at the time of transfer. - The fair market value of the services rendered, as determined by the Bureau of Labor Statistics. - The value of the services rendered, as determined by what the shareholder normally changes.arrow_forwardAre the stockholders of a corporation are considered as residual claimant of the business enterprise?arrow_forward
- True or False: An S Corporation recognizes gain on the distribution of appreciated property to its shareholders which is then reported to its shareholders on Schedule K-1.arrow_forwardWhen are distributions to shareholders in an s corporation taxable and non taxable?arrow_forwardWhen may a corporation sell, lease, exchange, mortgage, or pledge all or substantially all of its assets in the usual and regular course of its business? b. When may a corporation sell, lease, exchange, mortgage, or pledge all or substantially all of its assets other than in the usual and regular course of its business? c. What are the rights of a shareholder who dissents from a proposed sale or exchange of all or substantially all of the assets of a corporation other than in the usual and regular course of its business?arrow_forward
- which characteristics of a corporation limits a stockholder's loss to the amount of his or her investment in the stock of the corporation ?arrow_forwardWhat Income tax issues must a corporation consider before it makes a noncash distribution to a shareholder?arrow_forwardWhat is the tax impact to a C corporation or an S corporation when it makes a (noncash) property distribution to a shareholder? Multiple Choice Recognizes either gain or loss. Does not recognize gain or loss. Recognizes gain but not loss. Recognizes loss only.arrow_forward
- What type of taxpayers (entities) are affected by the passive loss rules? What is the significance of a closely held corporation with regard to the deductibility of passive losses?arrow_forwardWhat is the control requirement of § 351? Describe the effect of the following in satisfying this requirement: A shareholder renders only services to the corporation for stock. A shareholder renders services and transfers property to the corporation for stock. A shareholder has only momentary control after the transfer. A long period of time elapses between the transfers of property by different shareholders.arrow_forwardCOMPREHENSIVE PROBLEMS a connect Select problems are available in Connect®. 56. Several years ago, your client, Brooks Robertson, started an office cleaning service. His business was very successful, owing much to his legacy as the greatest defen- sive third baseman in major league history and his nickname, “The Human Vacuum Cleaner." Brooks operated his business as a sole proprietorship and used the cash method of accounting. Brooks was advised by his attorney that it is too risky to op- erate his business as a sole proprietorship and that he should incorporate to limit his liability. Brooks has come to you for advice on the tax implications of incorpora- tion. His balance sheet is presented below. Under the terms of the incorporation, Brooks would transfer the assets to the corporation in return for 100 percent of the company's common stock. The corporation would also assume the company's liabilities (payables and mortgage). Balance Sheet Adjusted Basis FMV Assets Accounts receivable…arrow_forward
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