Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

Sarah owns 45% of the stock in a C corporation that had a profit of $260,000 in 2011. Kevin owns a 45% interest in a partnership that had a profit of $260,000 during the year. The corporation distributed $30,000 to Sarah, and the partnership distributed $30,000 to Kevin.

1. How much income does Kevin report for 2011?

2. How much income does Sarah report for 2011?

Jaron and Cheri are going to establish a business entity. They expect the business to be very successful in the long-run, but project losses of approximately $100,000 for each of the first five years. Due to potential environmental concerns, limited liability is a requisite for the owners.

3. Which form of business entity should they select?
a. Sole Proprietorship
b. C Corporation
c. S Corporation

GiGi owns a 60% interest in an S corporation that earned $150,000 in 2011. She also owns 60% of the stock in a C corporation that earned $150,000 during the year. The S corporation distributed $30,000 to GiGi and the C corporation paid dividends of $30,000 to GiGi.

4. How much income must she report from these businesses?
a. $0 income from the S corporation and $30,000 from the C corporation.
b. $90,000 income from the S corporation and $30,000 from the C corporation.
c. $90,000 income from the S corporation and $0 from the C corporation.
d. $30,000 income from the S corporation and $30,000 of dividend income from the C corporation.

Laci is the sole shareholder of a C corporation, and Edmond owns a sole proprietorship. Both businesses were started in 2011, and each business has a long-term capital gain of $20,000 for the year. Neither business made an distributions during the year.

5. With respect to this information, which of the following statements is INCORRECT?
a. Edmond must report a $20,000 long-term capital gain on his 2011 tax return.
b. Laci's corporation does not receive a preferential tax rate on the $20,000 long-term capital gain.
c. Laci must report a $20,000 long-term capital gain on her 2011 tax return.
d. Edmond receives a preferential tax rate on a long term-capital gain of $20,000.

Bob and Chad each own one-half of the stock of WIMP, Inc., a C corporation. Each shareholder has a stock basis of $115,000. WIMP has accumulated E & P of $300,000. WIMP's taxable income for the current year is $80,000, and it distributes $50,000 to each shareholder.

6. Compute Bob's stock basis at the end of the year.
Tim and Ayana each have a 50% ownership is Robert Partnership. On January 1, Tim's outside basis was $43,000. The partnership reports the following items for the current year:
Partnership liabilities increased by $5,000
The partnership received tax exempt interest income of $7,000
Tim received a distribution of $38,000
The partnership paid Ayana's alimony of $12,000
The partnership sustained an ordinary loss of $36,000

7. What is Tim's deductible loss for the current year?

Breanna contributes appreciated property (i.e. adjusted basis of $65,000 and a FMV of $100,000) to a partnership in a transaction which qualifies for non-recognition of gain. Brenda's ownership interest is 60%. The partnership later sells the appreciated property for $120,000. The property is not depreciable.

8. What is the effect of the sale on Breanna's gross income?

9. A corporation may alternate between S corporation and C corporation status each year, depending on which results in more tax savings. TRUE/FALSE

10. Actual dividends paid to shareholders result in double taxation. Constructive dividends also result in double taxation. TRUE/FALSE

11. A major benefit of the S corporation election is the general avoidance of double taxation. TRUE/FALSE

12. If the amounts are reasonable, salary payments to shareholder-employees can reduce or avoid the double taxation result of a C corporation. TRUE/FALSE

13. Andre contributes land with an adjusted basis of $70,000 and a fair market value of $100,000 to White, Inc., an S corporation, in exchange for 50% of the stock of White, Inc. Cathy contributes cash of $100,000 for the other 50% of the stock. If White later sells the land for $110,000, $35,000 [$30,000 + 50%($10,000)] is allocated to Andre and $5,000 (50%($10,000)) is allocated to Cathy. TRUE/FALSE

14. If an S corporation distributes appreciated property as a dividend, it must recognize gain as to the appreciation. TRUE/FALSE

15. Saniyah's basis for her partnership interest is $85,000. If she receives a current distribution of $95,000 in cash, her recognized gain is $10,000 and her basis for her partnership interest is reduced to $0. TRUE/FALSE

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M927808

Have any Question? 


Related Questions in Basic Finance

In a random sample of 63 students in 2000 3 got first class

In a random sample of 63 students in 2000, 3 got first class honours. A random sample of 42 is conducted in 2009 and 7 got firsts. (a) Give a 95 percent confidence interval for the percentage who got firsts in 2000. (b) ...

What distinguishes indebtedness and equity is preferred

What distinguishes indebtedness and equity? Is preferred stock a debt or equity instrument? Explain ? How does a mutual fund perform its function as a financial intermediary? What is meant by the term "maturity intermedi ...

1 what three rules govern the construction of a grouped

1. What three rules govern the construction of a grouped frequency distribution? 2. What is the difference between a histogram and a bar graph? 3. Distinguish among the median, mode, and mean.

1 why should investors be concerned about market rents if

1. Why should investors be concerned about market rents if they are purchasing a property subject to leases? 2. What is meant by equity? 3. What are the similarities and differences between an overall rate and an equity ...

G- value company is considering two investments both of

G- Value company is considering two investments, both of which costs $20,000. The firm's cost of capital is 15 percent (%). The cash flows are as follows: YEAR PROJECT A PROJECT B 1 12,000 10,000 2 8,000 6,000 3 6,000 16 ...

1 according to readygov what are the three basic steps

1. According to Ready.Gov, what are the three basic steps people can take to prepare for any type of disaster? 2. What are the seven key elements that can be used to measure the comprehensive nature of an evacuation plan ...

What is meant by the term prevailing torque what do we

What is meant by the term prevailing torque? What do we mean by the terms initial preload and residual preload? Why do they differ? What limits the usefulness of the so-called, long-form torque-preload equation? Explain ...

Vbn is a microcap stock included in the wilshire 5000 index

VBN is a microcap stock included in the Wilshire 5000 index. The following lists the actual returns on VBN and the Wilshire 5000 index for 6 recent years. Year  VBN  Wilshire 20X1  -18.0% 13.0%  20X2 -10.0% -8.0% 20X3   ...

Compare and contrast the cash conversion cycles ccc of

Compare and contrast the cash conversion cycles (CCC) of Caterpillar Inc. (ticker: U:CAT), Ingersoll-Rand Company Limited (U:IR), and Terex Corp. (U:TEX). Calculate the average age of inventory (AAI), average collection ...

Given the following informationcurrent stock price 35stock

Given the following information: Current stock price $35 Stock beta: 2 Risk-free rate: 4% Market risk premium: 6% Expected dividend, D 1 : $3.00 Expected long-run growth rate of dividends: 6% What is the required return ...

  • 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

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

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