Problem 1: Describe and compare the federal tax treatment of the following entities:
- C corporation
- S corporation
- Partnership
- LLC
Problem 2: How may an entity that is unincorporated under state law determine its classification as an entity for federal income tax purposes? If such an entity does nothing anything, how will it be taxed, as a partnership or corporation? Does the number of participants in the entity affect your answer? Be as specific as you can in citing the appropriate authoritative sources, especially the regulations.
Problem 3: Ethan transfers $20,000 cash and land to Newcorp, Inc. in exchange for all of its stock. The land has a $140,000 adjusted basis and a fair market value of $250,000 immediately before the exchange. Newcorp assumes a $200,000 mortgage on the land for a valid business purpose.
(a) What, if anything, must Jim recognize on this exchange?
(b) What is Jim's basis in the stock?
Note: You should cite authoritative sources to support the discussions including the Code, regulations, any relevant IRS pronouncements and court decisions.