Chapter 12 Homework - Federal Taxation

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Federal Taxation Cengage Chapter 12 Homework Exercise 12-1 (LO. 2, 3) Marie and Ramesh form Roundtree Corporation with the transfer of the following. Marie performs personal services for the corporation with a fair market value of $80,000 in exchange for 400 shares of stock. Ramesh contributes an installment note receivable (basis $25,000; fair market value $30,000), land (basis $50,000; fair market value $170,000), and inventory (basis $100,000; fair market value $120,000) in exchange for 1,600 shares. Determine Marie and Ramesh's current income, gain, or loss and calculate the basis that each takes in the Roundtree stock. If an amount is zero, enter "0". Marie has income of $ 80,000 V and$ 80,000 @V basis in her 400 shares of stock. Ramesh has income of § 0 V ands 175,000 @ basisin his 1,600 shares of stock. Exercise 12-4 (LO. 3, 4) Diego transfers real estate with an adjusted basis of $260,000 and fair market value of $350,000 to a newly formed corporation in exchange for 100% of the stock. The corporation assumes the liability on the transferred real estate in the amount of $300,000. Determine Diego's recognized gain on the transfer and the basis for his stock. If amount is zero, enter "0". Diego has a recognized gain on the transfer of $ 40,000 ' and a basis of $ 0 V for his stock. Exercise 12-9 (LO. 8) Compute the income tax liability for each of the following unrelated calendar year C corporations. a. Darter Corporation has taxable income of $68,000. $ 14,280 b. Owl Corporation has taxable income of $10,800,000. $ 2,268,000 c. Toucan Corporation, a personal service corporation, has taxable income of $170,000. s 35,700 Problem 12-22 (LO. 2, 3, 4) Adam transfers property with an adjusted basis of $50,000 with a fair market value of $400,000 to Swift Corporation for 90% of the stock. The property is subject to a liability of $60,000, which Swift assumes. If an amount is zero, enter "0". a. What is the basis of the Swift stock to Adam? Adam recognizes a gain of 10,000 @V and the basis of the Swift stock to Adam is $ 0|V.

Federal Taxation Cengage Chapter 12 Homework Problem 12-10 (LO. 1) Janice is the sole owner of Catbird Company. In the current year, Catbird had operating income of $100,000, a long-term capital gain of $15,000, and a charitable contribution of $5,000. Janice withdrew $70,000 of profit from Catbird. Noting the tax entity type cited and regarding how Janice will report this information on her individual tax return, label each statement listed as being either "True” or "False”. a. Assume Catbird is an LLC. e Janice will report the $15,000 long-term capital gain on Schedule D. Jrue <~ « Janice will report nothing as a single-member LLC, by default, is taxed as a corporation. False ~ v e Janice will report $100,000 operating income on Schedule C. True v v e Janice's $70,000 withdrawal have no effect on her individual tax return. True <~ v * Janice may claim a deduction for qualified business income of $20,000. True <~ v b. Assume Catbird Company is an S corporation. * As a tax reporting entity, Catbird will report and then pass through everything to Janice. True ~ * Janice would claim a deduction for qualified business income of $20,000. frue v v * Janice will report $100,000 of operating income on Schedule E. True ~ v o If Janice does not itemize, the $5,000 charitable contribution may be reported on False v Schedule E. — c. Assume Catbird is a C corporation and it has sufficient E & P. e Catbird Company will report taxable income of $40,000 on Form 1065. False v v e If Catbird disbursed $70,000 to Janice, Janice would report it on her tax return. True v v e Catbird Company will report taxable income of $110,000 on Form 1120. True v v e Catbird is a separate taxable entity. Except for any dividends, Janice will report nothing on her individual return. Problem 12-11 (LO. 1) Complete the statement below in response to the question, "Can a sole proprietor form as a single-member limited liability company (LLC)?" Yes v v . Most states allow v for single-member LLCs. Under the default rules of the check-the-box Regulations, a single- member LLC is taxed as a sole proprietor v + and by filing Form 8832 a single-member LLC is taxed as a corporation > v. Problem 12-15 (LO. 2) Sarah incorporates her small business but does not transfer to the corporation the machinery and equipment the business uses. Sarah instead leases the machinery and equipment to the corporation for an annual rent. Indicate whether the following statements are "True" or "False" regarding Sarah's decision not to transfer the machinery and equipment to the corporation when the business was incorporated. a. Leasing the machinery and equipment provides Sarah income that will be treated as dividend income. False v v b. The transfer of the machinery and equipment would trigger a taxable event for the corporation. False > v c. The corporation will be allowed a business deduction for the annual rent payment. True > v d. Sarah will be allowed to deduct depreciation and other related expenses in connection with the leasing True v activity. ——

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