Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Taxation Expert

problem 1: X has 10 shareholders, each of whom owns 100 of its 1,000 outstanding shares of common stock (worth $100 per share). No other stock is outstanding. Find out whether the securities describeed in the situations below are best characterized as debt or equity of X (support your answer with citations as essential).

a) X issues to the public for cash $1 million worth of “pure preferred” stock (nonvoting, nonparticipating, nonconvertible), callable in five years at par, paying a 12% cumulative dividend.

b) In return for a transfer of $1,250,000 cash, X issues an unsecured promissory note for $1,250,000 to Mr. Pang, a well-known local venture capitalist, payable in 6 years with interest keyed to X’s profitability. The note is subordinated to all other debt. X could not have borrowed this amount on these terms from a bank.

c) X issues to the public 1,000 notes for $1,000 each, maturing in 20 years, at which time the holder will be entitled to elect to receive either $600 cash or 50 shares of X common stock. Interest will be paid quarterly in an amount based on X’s common dividend, but not less than $60 per annum. The interest rate for nonconvertible unsubordinated debt in the market is 12%. The notes will be subordinated to all other debt.

problem 2: L has business assets worth $6,000,000, NOL carryovers of $1,000,000 expiring in 14 years, and NOL carryovers of $1,400,000 expiring in 15 years. 100% of L’s stock is worth $8,000,000. The long-term tax exempt rate is 5%. The current third party market interest rate is 6%. Commercial bank mortgage rates are 3%. 

a) What will the § 382 limitation be if an ownership change occurs with respect to L’s stock? Assuming sufficient taxable income, how long will it take to fully utilize the NOLs?

b) Same problems and facts as (a) above, except L has minimal assets and 100% of its stock is worth $2,000,000.

problem 3: A owns all of the stock of X with a basis of $200. A’s three sons own all of the stock of Y equally. X and Y each have 100 shares of common stock outstanding (worth $4 each) and E&P of $100, respectively. A sells one half of the X stock to Y for $200.

a) What is the amount and character of income or loss to A on this transaction?

No because it only applies to redemptions. 318 test IRC 302(a) does not qualify under family attribution.

b) Would your answer change if X, rather than A’s three sons, owned all of the stock of Y? Why or why not?

problem 4: All of the outstanding stock of X corporation is owned by Abby (30 shares, $30,000 basis), Bennett (30 shares, $30,000 basis), and Candice (40 shares, $40,000 basis), who are unrelated. X has an earnings and profits deficit for the current year of $10,000 and accumulated earnings and profits (excluding the current year deficit) of $220,000. X plans to completely liquidate in the current year.

a) What are the tax consequences to Abby if X distributes a piece of equipment used in X’s business with a fair market value of $25,000 to Abby in exchange for her stock as part of the complete liquidation of X. (Assume X will also make similar distributions to Bennett and Candice).

b) What are the tax consequences to X of the distribution to Abby? X’s basis in the equipment was $36,000. X bought the equipment new six years ago.

Taxation, Accounting

  • Category:- Taxation
  • Reference No.:- M96134

Have any Question? 


Related Questions in Taxation

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. (,http://www.taxalmanac.org/index.php/Tax_Research_Resources, or use the Intern ...

Prepare a 2015 form 1120 - us corporation income tax return

Prepare a 2015 Form 1120 - U.S. Corporation Income Tax Return - for Freddy Falcon Inc. based on the information provided: Prepare the return as if you were preparing it for an actual client. All necessary forms and sched ...

Discussionpart 1 please respond the following question no

Discussion PART 1 PLEASE RESPOND THE FOLLOWING QUESTION NO LESS THEN 350 WORDS (ORIGINAL WORK, NO PLAGIARISM, 1 Reference "Gift Transfers and Gift Tax Planning" Please respond to the following: • Per the text and IRC, a ...

Consolidated tax return with intercompany

Consolidated Tax Return with Intercompany Transactions ParentCo and SubCo are calendar year corporations that keep their respective books on the accrual basis. The companies have taxable income of $200,000 and $250,000, ...

Assignment lasa-tax seminaryou are the instructor of a

Assignment: LASA-Tax Seminar You are the instructor of a one-day tax seminar to inform international students studying business in the United States about the current tax system. You are preparing a background report to ...

From circular 230 compare and contrast the ability to

From Circular 230 compare and contrast the ability to practice before IRS between a CPA and an AFSP tax preparer during 2015

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 ...

Essay topics mandatorypick a tax topic topic of emerging

Essay Topics; Mandatory Pick a tax topic topic of emerging interest and write an essay of at least 300 words; provide at least 3 references. Internet research is expected. Assume the reader has no background information, ...

Assignmentbullhoffman w h raabe w a smith j e maloney d m

Assignment • Hoffman, W. H., Raabe, W. A., Smith, J. E., Maloney, D. M., & Young, J. C. (2016). South-western federal taxation 2016: Corporations, partnerships, estates and trusts ( 39th ed.). Mason, OH: South-Western Ce ...

Taxplease fully answer the following1 what does it mean

Tax Please fully answer the following: 1. What does it mean when we say that there is a unified gift and estate tax in the US? 2. What is the difference between the estate and gift tax and the income taxation of estates ...

  • 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