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C:2-31 Transfer of Property and Services to a Cont...

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C:2-31 Transfer of Property and Services to a Controlled Corporation. In 2010, Ed, Fran, and George form Jet Corporation. Ed contributes land having a $35,000 FMV purchased as an investment in 2006 for $15,000 in exchange for 35 shares of Jet stock. Fran contributes machinery (Sec. 1231 property) purchased in 2006 and used in her business in exchange for 35 shares of Jet stock. Immediately before the exchange, the machinery had a $45,000 adjusted basis and a $35,000 FMV. George contributes services worth $30,000 in exchange for 30 shares of Jet stock. a. What is the amount of Ed?s recognized gain or loss? b. What is Ed?s basis in his Jet shares? When does his holding period begin? c. What is the amount of Fran?s recognized gain or loss? d. What is Fran?s basis in her Jet shares? When does her holding period begin? e. How much income, if any, does George recognize? f. What is George?s basis in his Jet shares? When does his holding period begin? g. What is Jet?s basis in the land and the machinery? When does its holding period begin? How does Jet treat the amount paid to George for his services? h. How would your answers to Parts a through g change if George instead contributed $5,000 in cash and services worth $25,000 for his 30 shares of Jet stock? C:2-35 Incorporating a Sole Proprietorship. Tom incorporates his sole proprietorship as Total Corporation and transfers its assets to Total in exchange for all 100 shares of Total stock and four $10,000 interest-bearing notes. The stock has a $125,000 FMV. The notes mature consecutively on the first four anniversaries of the incorporation date. The assets transferred are as follows: Assets Adjusted Basis FMV Cash $ 5,000 $ 5,000 Equipment $130,000 Minus: Accumulated depreciation ) (70,000) 60,000 90,000 Building $100,000 Minus: Accumulated depreciation ) (49,000) 51,000 40,000 Land 24,000 30,000 Total 140,000 165,000 a. What are the amounts and character of Tom?s recognized gains or losses? b. What is Tom?s basis in the Total stock and notes? c. What is Total?s basis in the property received from Tom? C:3-39 Taxable Income Computation. Omega Corporation reports the following results for the current year: Gross profits on sales $120,000 Dividends from less-than-20%-owned domestic corporations 40,000 Operating expenses 100,000 Charitable contributions (cash) 11,000 a. What is Omega?s charitable contributions deduction for the current year and its charitable contributions carryover to next year, if any? b. What is Omega?s taxable income for the current year, assuming qualified production activities income is $20,000? C:3-50 Computing Taxable Income and Income Tax Liability. Pace Corporation reports the following results for the current year: Gross profit on sales $120,000 Long-term capital loss 10,000 Short-term capital loss 5,000 Dividends from 40%-owned domestic corporation 30,000 Operating expenses 65,000 Charitable contributions 10,000 a. What are Pace?s taxable income and income tax liability, assuming qualified production activities income is $55,000? b. What carrybacks and carryovers (if any) are available and to what years must they be carried?,I can add one more hour but that is it. What if the first 2 questions are answered will that allow time?

 

Paper#3287 | Written in 18-Jul-2015

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