Corporate Distributions Assignment-1

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Liberty University *

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Feb 20, 2024

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CORPORATE DISTRIBUTIONS ASSIGNMENT 1 Background in Corporate Taxation Essay ACCT 618 MS: Accounting: Taxation, Liberty University November 12, 2023 I have no known conflict of interest to disclose. Correspondence concerning this article should be addressed to Porteah Purcell. Corporate Distributions Assignment For Chapter 13 13. In which of the following cases must the taxpayer annualize its income for a period of less than 12 months? a. Alpha Corporation was formed on August 17 and decided to report on the calendar year.

CORPORATE DISTRIBUTIONS ASSIGNMENT 2 b. Beta Corporation was formed on March 8 and decided to use the fiscal year ending July 31. c. Gamma Corporation has been using a fiscal year ending April 30 and changed to a calendar year. d. Zeta Corporation, a calendar-year corporation, was liquidated on September 23. The question at hand falls under Section 443(d) of the Code. It specifies that a return for a period of less than a year, which is referred to as a "short period" in this section, must be made in any of the following circumstances. Answer: B. Beta Corporation was established on the 8th of March and decided to adopt a fiscal year that ends on the 31st of July. In this particular instance, the fiscal year covers the period from March 8 to July 31, exhibiting a duration that is less than the standard 12-month period. Therefore, Beta Corporation is required to calculate its annualized income for the current partial fiscal year.in other words, the duration of the taxable period ought to be limited to 12 months based on the fiscal term rather than the calendar year. 48. Sam Co. sells a product whose cost (and sales price) has risen continually. This has produced increases in Sam Co.'s gross receipts, and Sam Co. would like to use an inventory method that would minimize its tax liability. Would you recommend specific identification, FIFO, or LIFO? Why? Answer Last In First Out (LIFO) The Last in, First out (LIFO) method requires detailed inventory information to monitor the cost of purchased products effectively. The Last-In, First-Out (LIFO) method entails selling items at

CORPORATE DISTRIBUTIONS ASSIGNMENT 3 their most recently recorded purchase price. Since inventory and costs tend to increase gradually over time, utilizing the last pricing would lead to a more significant decrease in gross income. There is a possibility that item prices underwent alterations within a solitary year. If the cost of goods remains constant, a surplus of funds will be generated. This question pertains to the applicability of Publication 538, Code Section 471, and Code Section 472. 51. Steve sold for $200,000 his undivided one-third interest in an apartment building in which he had a $30,000 adjusted basis. The buyer put $40,000 down, assumed Steve’s share of the mortgage, and signed an installment obligation with a face value of $120,000. $20,000 of the principal was paid at the end of the year of sale. Compute the following: a. Contract price. b. Gross profit and gross profit percentage c. Payment in a year of sale d. Gain in the year of sale Answers: Steve's assigned share of the financial obligation about the mortgage payment should have been. $40,000 ($200,000 - $40,000 - $120,000) a. The contract price is: • Down Payment = 40,000 • Installment = 120,000 • The expected mortgage amount and the basis. = 10,000 • Contract Price = 40,000 + 120,000 + 10,000 = 170,000 b. Gross Profit and Gross Profit Percentage= 170,000 and 100% c. Payment in the year of the sale • Down payment =40,000 • The expected mortgage amount and the basis =10,000

CORPORATE DISTRIBUTIONS ASSIGNMENT 4 • Installment Payment = 20,000 • Payment throughout the fiscal year of the transaction = 40,000+10,000+20,000+70.000 d. The total gross profit made during the sales year. • Gross Profit Percentage = 100% * 70,000 = 70,000 54. Brice sells a piece of raw land with a basis of $10,000, which he has owned for years as an investment. What are the tax consequences to Brice, a cash-basis taxpayer, for the following consideration received: a. Cash of $30,000 b. Motel worth $50,000, subject to $20,000 of liabilities c. Installment note due in one year without interest with a face value of $30,000 and a fair market value of $27,000. d. Same as (c), but Brice elects out of installment reporting. Answer s: a. The taxpayer must declare this as a tax consequence because their cash basis is currently $30,000, and they have received the money. b. The value of the motel is $50,000, but it has liabilities of $20,000. This mandates that the balance must be $30,000 at the very least. It is necessary to declare either 50,000 or 20,000 as cash, which must be reflected as cash received. c. No reporting is required as payment will be made after a year. d. If the installment is chosen, it will be worth less in terms of market value than what it is worth in terms of face value. It is not necessary to disclose any revenue in the event of a loss; in contrast, if the market value exceeds the face value, it would be necessary to record the income as a capital gain.

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