PRINCIPLES OF TAXATION F/BUS...(LL)
PRINCIPLES OF TAXATION F/BUS...(LL)
23rd Edition
ISBN: 9781260433197
Author: Jones
Publisher: MCG
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Chapter 12, Problem 7IRP
To determine

Identify the tax issue(s) and state each issue in the form of a question.

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Jean Jones, Robert Martin, and Lee Brown decide to form a new business to be operated as a C corporation. All three plan to transfer property to JRL Inc. solely in exchange for newly issued common stock in the corporation. Robert and Lee plan to transfer legal title in their properties to the corporation on December 1, 20X2, at which time they will receive 800 and 700 shares of JRL stock, respectively. Jean Jones will be out of the country through January 20X3, and will wait to transfer title in her assets to JRL Inc. until February 5, 20X3, in exchange for 500 shares of stock. Required What will be the tax consequences of this February 5 exchange if Jean’s business properties have a FMV of $10,000 and a basis of $3,500 on the date she exchanges them for a 25% stock interest in JRL Inc.?
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Rondo and his business associate, Larry, are considering forming a business entity called R&L, but they are unsure about whether to form it as a C corporation, an S corporation, or an LLC taxed as a partnership for tax purposes. Rondo and Larry would each invest $200,000 in the business. Thus, each owner would take an initial basis in his ownership interest of $200,000 no matter which entity type is formed. Shortly after the formation of the entity, the business borrowed $60,000 from the bank. If applicable, this debt will be shared equally between the two owners.   A. After taking the loan into account, what is Rondo's tax basis in his R&L stock if R&L is formed as a C corporation? B. After taking the loan into account, what is Rondo's tax basis in his R&L stock if R&L is formed as an S corporation? C. After taking the loan into account, what is Rondo's tax basis in his R&L stock if R&L is formed as an LLC and taxed as a partnership?

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PRINCIPLES OF TAXATION F/BUS...(LL)

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