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1.Kyle forms a corporation and transfers property...

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1.Kyle forms a corporation and transfers property having a basis to him of $20,000 and a fair market value of $30,000 to the corporation for 1,000 shares of $9 par stock. One year later, Bob transfers property having a basis to him of $2,000 and a fair market value of $4,000 for 100 shares of the stock. Bob is not related to Kyle. The corporation issued no other stock. a. How much gain does Kyle recognize on his exchange? What is the basis to Kyle of his 1,000 shares? b. How much gain does Bob recognize on his exchange? What is the basis to Bob of his 100 shares? c. What gain or loss is recognized by the corporation when it issues its shares to Kyle? What is the basis to the corporation of the property it received from Kyle? 2.Good Co. had a net loss of $75,000 from merchandising operations in 2007. Jane owns Good Co. and works 20 hours a week in the business. She has a large amount of income from other sources and is in the 35% marginal tax bracket. Would Jane's tax situation be better if Good Co. were a proprietorship or a C-corporation? Explain why. 3.Shareholders in closely held C-corporations often pay themselves large salaries in order to avoid double taxation on corporate income. a. Briefly explain the double taxation problem and how paying large salaries to owners avoids it. b. Briefly discuss how the reasonable compensation issue applies to S-corporations. c. Briefly discuss the IRS s position on reasonable compensation for owner-employees of closely held C-corporations.,The home work is due in 30 minutes. thank you,The most important question is 1 and 2. Are you almost done? Thank you.

 

Paper#3625 | Written in 18-Jul-2015

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