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tax problems - questin and answer,.,. ch 22




Question;37. LO.8, 9 At the beginning of the tax year, Lizzie holds a $10,000 stock basis as the sole shareholder of Spike, Inc., an S corporation. During the year, Spike reports the following.Determine Lizzie?s stock basis at the end of the year, and the treatment of her cash distribution.Net taxable income from sales $ 25,000Net short-term capital loss (18,000)Cash distribution to Lizzie, 12/31 15,00038. LO.8, 9 Assume the same facts as in Problem 37, except that the cash distribution toLizzie amounts to $40,000. Determine Lizzie?s stock basis at the end of the year and the treatment of her cash distribution.39. LO.8 Jeff, a 52% owner of an S corporation, has a stock basis of zero at the beginning of the year. Jeff?s basis in a $10,000 loan made to the corporation and evidenced by a corporate note has been reduced to zero by pass-through losses. During the year, his net share of the corporate taxable income is $11,000. At the end of the year, Jeff receives a $15,000 distribution. Discuss the tax effects of the distribution.40. LO.8 Assume the same facts as in Problem 39, except that there is no $15,000 distribution, but the corporation repays the loan principal to Jeff. Discuss the tax effects.41. LO.8 Assume the same facts as in Problem 39, except that Jeff?s share of corporate taxable income is only $8,000 and there is no distribution. However, the corporation repays the $10,000 loan principal to Jeff. Discuss the tax effects. Assume that there was no corporate note (i.e., only an account payable). Does this change your answer? Explain.42. LO.9 Maple, Inc., is an S corporation with a single shareholder, Bob Maple. Bob believes that his stock basis in the entity is $50,000, but he has lost some of the records to substantiate this amount. Maple reports an ordinary loss for the year of $80,000. What are the Federal income tax aspects to consider?43. LO.6, 9 At the beginning of the year, Ann and Becky own equally all of the stock ofWhitman, Inc., an S corporation. Whitman generates a $120,000 loss for the year (not a leap year). On the 189th day of the year, Ann sells her half of the Whitman stock to her son, Scott. How much of the $120,000 loss, if any, belongs to Scott?44. LO.6, 9 In Problem 43, how much of the Whitman loss belongs to Ann and Becky?Becky?s stock basis is $41,300.45. LO.5, 6, 8, 9 A calendar year S corporation has an ordinary loss of $80,000 and a capital loss of $20,000. Ms. Freiberg owns 30% of the corporate stock and has a $24,000 basis in her stock. Determine the amounts of the ordinary loss and capital loss, if any, that flow through to Ms. Freiberg. Prepare a tax memo for the files.46. LO.10 During 2013, Whindy Corporation, an S corporation, reports a recognized built-in gain of $80,000 and a recognized built-in loss of $10,000. Whindy holds an $8,000 unexpired NOL carryforward from a C corporation year. Whindy?s ordinary income for the year is $65,000. Calculate any built-in gains tax.47. LO.10 Flint, an S corporation with substantial AEP, reports operating revenues of $410,000, taxable interest income of $390,000, operating expenses of $260,000, and deductions attributable to the interest of $150,000. Calculate any passive investment income penalty tax payable.48. LO.5, 6, 11 Bonnie and Clyde each own one-third of a fast-food restaurant, and their13-year-old daughter owns the other shares. Both parents work full-time in the restaurant, but the daughter works infrequently. Neither Bonnie nor Clyde receives a salary during the year, when the ordinary income of the S corporation is $180,000. An IRS agent estimates that reasonable salaries for Bonnie, Clyde, and the daughter are $30,000, $35,000, and $10,000, respectively. What adjustments would you expect the IRS to impose upon these taxpayers?49. LO.11 Friedman, Inc., an S corporation, holds some highly appreciated land and inventory and some marketable securities that have declined in value. It anticipates a sale of these assets and a complete liquidation of the company over the next two years.Arnold Schwartz, the CFO, calls you, asking how to treat these transactions. Prepare a tax memo indicating what you told Arnold in the phone conversation.50. LO.6, 10 Samuel Resee sold 1,000 shares of his stock in Maroon, Inc., an S corporation.He sold the stock for $15,700 after he had owned it for six years. Samuel had paid $141,250 for the stock, which was issued under ? 1244. Samuel is married and is the owner of the 1,000 shares. Determine the appropriate treatment of any gain or loss on the stock sale.51. LO.11 Blue is the owner of all of the shares of an S corporation, and Blue is considering receiving a salary of $110,000 from the business. She will pay the 7.65% FICA tax on the salary, and the S corporation will pay the same amount of FICA tax. If Blue reduces her salary to $50,000 and takes an additional $60,000 as a cash distribution, how would her Federal income tax liabilities change?


Paper#38704 | Written in 18-Jul-2015

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