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 suppose you withdraw 1000 from your checking account and

1. Suppose you withdraw $1,000 from your checking account and use the funds to buy a certificate of deposit at your bank. How will these actions affect M1 and M2? Why aren't credit cards included in M1 or M2? 2. In a rep ...

1 how many funds will be used by a state or local

1. How many funds will be used by a state or local government? 2. The budget for a state or local government is not as binding as a budget for a commercial business. Comment. 3. Which organization provides a service wher ...

The whilst co is analyzing a project that has projected

The Whilst Co. is analyzing a project that has projected sales of $189,400 and costs of $102,300. The project requires an investment in inventory of $15,000 plus another $28,000 in accounts receivable. Fixed assets of $8 ...

Your employer provides a 401k retirement plan and matches

Your employer provides a 401(k) retirement plan and matches 100% of your contributions up to 5%. Your annual income is $54,000 and you expect to earn an annualized 8.0% return on your investment. What is the value of you ...

The shareholders of motive power corp need to elect four

The shareholders of Motive Power Corp. need to elect four new directors to the board. There are 14,900,000 shares of common stock outstanding, and the current share price is $11.10. If the company uses cumulative voting ...

An article in the wall street journal discussing the nickel

An article in the Wall Street Journal discussing the nickel market contained the following: The sharp rise in nickel prices demonstrates how even a slight shift in demand and supply can roil tiny commodity markets like t ...

Explain why interest rate swaps are more widely used than

Explain why interest rate swaps are more widely used than currency and equity swaps? Explain how swaps are similar to but different from forward contracts? Suppose that a party engages in a swap, but before the expiratio ...

What is the present value of a 10-year annuity of 3000 per

What is the present value of a 10-year annuity of $3,000 per period in which payments come at the beginning of each period? The interest rate is 12 percent. Use Appendix D for an approximate answer, but calculate your fi ...

A firm has previously issued fixed rate noncallable debt

A firm has previously issued fixed rate noncallable debt. Because interest rates are perceived to be temporarily high, the firm would like to have the flexibility of calling the debt later when rates are expected to fall ...

Consider a us investor who owns a portfolio of japanese

Consider a U.S. investor who owns a portfolio of Japanese securities worth 160 million japanese yen. In order to hedge to currency risk, he considers buying currency puts on yen instead of selling futures contracts. In P ...

  • 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