Problem - Provide Journal Entries for the company for these transactions.
1. John starts a new business as a Corporation. He contributes $10,000 in cash, equipment with a FMV of 50,000 and a tax basis of $30,000 for all the common stock in the company. The corporation spends $1,000 with its' attorney to setup the corporation.
2. Mary starts a new business as a Corporation and files an S Election. She contributes $5,000 in cash and equipment with a FMV of $75,000 with a basis of $50,000 in exchange for the all common stock of the company and a note for $10,000.
3. Tom contributes equipment with a FMV of $25,000 and a basis of $15,000 to a corporation for 25% of the outstanding stock.
4. X corporation distributes a company vehicle to it's sole shareholder with a FMV of $5,000, cost of $25,000 and accumulated depreciation of $22,000.
5. Tom contributes real property with a FMV of $200,000, basis of $100,000 and a mortgage of $50,000 assumed by a partnership for a 50% interest in profits and capital of the partnership.
6. Y corporation, a C corp, pays rent on a beach house for the personal use of it's stockholder and post it to rent expense. As their CPA what if any adjusting journal entry do you propose. The company has earnings and profits.
7. XYZ, LLC is bringing in a new partner who is contributing property for their interest in the company. The new partner will contribute property with a FMV of $150,000, cost of $100,000 and accumulated depreciation of $50,000. The partnership will assume the $75,000 debt on the property.
8. ABC partnership distributes property with a FMV of $25,000 and a basis of $10,000 to one of its' partners.
9. An S corp distributes property to its' stockholder with a FMV of $20,000 and a basis of $15,000.
10. Debbie contributes property with a FMV of $50,000 and a basis of $25,000 to a LLC for an interest in the company. A week before the transaction she borrows $10,000 against the property.
11. M, a C corp, makes a distribution to its' stockholder of $5,000. It has no earnings and profits.
12. Please explain the differences between a C corp, S corp and partnerships with regards to the tax basis of their owners.