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

1 rate the following five websites from best to worst for

1. Rate the following five websites from best to worst for finding comparative financial ratio information about a company. Explain. 2. What might you do if you fail to find comparative financial ratio information and ne ...

Comment on the european central banks ecb activities in the

Comment on the European Central Banks (ECB) activities in the debt markets under the expanded asset purchase programme. Are they active in securitisation markets?

Firm abc is financed with equity market value 400 million

Firm ABC is financed with equity (market value $400 million) and perpetual debt (market value$1,000 million). The firm has decided that the current level of leverage is not optimal and wantsto reach a debt-equity ratio o ...

You have an investment with 10 semi-annual cash flows of

You have an investment with 10 semi-annual cash flows of $1000. The first payment is 6 months from today. If the EAR is 11%, what is the present value of this investment?

Why might targeting the money supply lead to lower output

Why might targeting the money supply lead to lower output growth than targeting the rate of interest? Consider your responses to Problems 1 and 2 before you answer. Problems 1 Draw a graph of money demand and money suppl ...

A country is the only production site in the world for

A country is the only production site in the world for hyperhoney infinite pasta, a wonderful product produced using a delicate, highly perishable extract obtainable from some trees that grow only in this country. Beyond ...

1 a security pays a yearly dividend of euro1100 market rate

1. A security pays a yearly dividend of €11,00 Market rate is 12%, risk free rate 3% and Beta = 0.80 - What would be its price today? And if its dividend growths yearly 1,1% - then what would be its Price? 2. A security ...

Why is it expected to be using higher discount rates to

Why is it expected to be using higher discount rates to discount stock dividend payments compared to the discount rates used to discount bond coupon payments?

What are the major sources of changes in aggregate

What are the major sources of changes in aggregate demand? What are the short- run and the long- run effects?

Explain why a yield curve can be negatively sloped would

Explain why a yield curve can be negatively sloped. Would interest rates be abnormally high or low? What would be the overall expectation of the direction of future short- term interest rates?

  • 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

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate