Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Taxation Expert

1A. Exxon Corporation is a calendar year C corporation in the business of providing fuel. It has 3 unrelated shareholders who are individuals: Pat, Dan, and Nancy. Pat owns 15% of the stock, Dan owns 15% of the stock, and Nancy owns 70% of the stock. All three shareholders have loaned money to Exxon at an sufficient interest rate of 6%. The interest expense in the hands of Exxon Corporation for 2010 amounts to $10,000 attributable to Pat’s loan, $10,000 attributable to Dan’s loan, and $50,000 attributable to Nancy’s loan. The interest payments are paid to all three shareholders on February 15, 2013.

1. Suppposing both Exxon and the 3 shareholders are cash basis taxpayers:

a) How much of the $70,000 interest expense is deductible by Exxon for tax year 2012?

b) How much of the $70,000 interest income is identified by Pat, Dan, and Nancy for 2012?

2. Supposing both Exxon is the accrual method taxpayer and the 3 shareholders are cash basis taxpayers:

c) How much of the $70,000 interest expense is deductible by Exxon for tax year 2012?

d) How much of the $70,000 interest income is identified by Pat, Dan, and Nancy for 2012?

1B. Suppose the same facts as in 1A above, except that interest payment checks were placed on shareholders’ office on December 31, 2012. Though, the shareholders are not in the office that day due to New Year celebrations. Exxon is the accrual method taxpayer and the 3 shareholders are cash basis taxpayers: (Hint ------>Constructive Receipt Doctrine)

a) How much of the $70,000 interest expense is deductible by Exxon for tax year 2012?

b) How much of the $70,000 interest income is known by Pat, Dan, and Nancy for 2012?

2A. Chewi Corporation, Greg (Individual), and Carla (Individual) own 30 shares, 30 shares, and 40 shares respectively, in Searl Corporation. Searl has 100 shares outstanding and accumulated E&P of $200,000, present E&P of $0. Corporation redeems 20 shares of Carla’s stock for $30,000. Carla paid $200 a share for the stock two years ago. Carla owns 90% of Chewi Corporation. For purposes of the substantially disproportionate distributions test: (Hint: Corporate Attribution Rules ------> FROM CORPORATION TO SHAREHOLDER)

Find out

a) Whether stock redemption qualifies for sale or exchange treatment in the hands of Carla. Also find out the amount of gain, if any.

b) Whether the stock redemption qualifies for dividend treatment in the hands of Carla. Also find out the amount of the dividend to Carla, if any.

2B. Suppose the same facts as in 4A above, except that instead of redeeming 20 shares of Carla’s stock, Searl Corporation redeems 20 shares owned by Chewi Corporation. For purposes of the substantially disproportionate distribution test: (Hint: Corporate Attribution Rules ------> FROM SHAREHOLDER TO CORPORATION)

Find out

a) Whether stock redemption qualifies for sale or exchange treatment in the hands of Chewi Corporation. Also find out the amount of gain, if any.

b) Whether the stock redemption qualifies for dividend treatment in the hands of Chewi. Also find out the amount of the dividend to Chewi, if any.

Taxation, Accounting

  • Category:- Taxation
  • Reference No.:- M91493

Have any Question? 


Related Questions in Taxation

Assignment constructive dividends redemptions and related

Assignment: Constructive Dividends, Redemptions, and Related Party Losses Suppose you are a CPA hired to represent a client that is currently under examination by the IRS. The client is the president and 95% shareholder ...

Preferred stock bailouts and personal holding company

"Preferred Stock Bailouts and Personal Holding Company" Please respond to the following: From your analysis of Section 306 in the e-Activity, differentiate between the tax treatment of earnings and profit on the distribu ...

1 the weighted-average cost of capital is the return the

1. The weighted-average cost of capital is the return the company needs to earn after tax in order to satisfy all its security holders. True False Question 2. Why is debt financing said to include a tax shield for the co ...

Assignment should the us convert to a zero personal income

Assignment: Should the U.S. Convert to a Zero Personal Income Tax? In a recent news article located at http://www.nbcnews.com/business/economy/heres-where-your-federal-income-tax-dollars-go-f654971, NBC News reported tha ...

Alternative minimum tax please resppond to the

"Alternative Minimum Tax" Please resppond to the following: • Analyze the rules concerning the alternative minimum tax for individual taxpayers. Based on your analysis, recommend at least two changes to the alternative m ...

The purpose of this tax research assignment is to help you

The purpose of this tax research assignment is to help you develop skills in researching tax issues. The final deliverable for this project will be a written memo which should be at least 2 pages double-spaced, 12 point ...

Question 1corporations have been scrutinized as to the

Question 1 Corporations have been scrutinized as to the recording and valuation of taxes they owe. The determination of how much they will pay is a combination income and expenses they report. There are many tax rules an ...

Question 1corporations have been scrutinized as to the

Question 1 Corporations have been scrutinized as to the recording and valuation of taxes they owe. The determination of how much they will pay is a combination income and expenses they report. There are many tax rules an ...

1the shareholders of a corporation will receive both voting

1)The shareholders of a corporation will receive both voting common stock and nonvoting preferred stock. Will this affect an S election? Why or why not? 2) The shareholders of a corporation will receive both voting commo ...

Tax assignmenta1what code section discusses partnership

TAX Assignment A.) 1. What Code Section discusses partnership formation under the Internal Revenue Code? 2. How does this Section differ from a corporate formation under Section 351? 3. What does it mean when we say that ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen