Question 1 -
In 2012, Tom, Dick and Harry form Tres Co. Tom contributes land, a capital asset having a FMV of $112,500 in exchange for 150 shares of Tres stock. He bought the land in 2010 for $125,000. Dick contributes machinery (Sec 1231 property purchased in 2009) having a $75,000 adjusted basis and a $67,500 FMV in exchange for 90 shares of Tres stock. Harry contributes services worth $45,000 in exchange for 60 shares of Tres
Tom realizes a $________________, Gain or Loss_____________
He recognizes:
A. Capital gain equal to the adjusted basis of the land
B. Capital gain equal to the FMV of the land
C. No gain/loss
D. Ordinary income equal to the adjusted basis of the land
Dick realizes a $________________, Gain or Loss_____________
He recognizes:
A. Capital gain equal to the adjusted basis of the machinery
B. Capital gain equal to the FMV of the machinery
C. No gain/loss
D. Ordinary income equal to the adjusted basis of the machinery
Harry realizes a $________________, Gain or Loss_____________
He recognizes:
A. Capital income of $_____________
B. Ordinary income $______________
Harry's basis in Tres shares is $____________ and his holding period begins:
A. Day after exchange date
B. Day of exchange
C. Day services are performed.
Tres Corp basis in the land is $____________ and their holding period begins:
a. 2009
b. 2010
c. Day after 2012
d. Day of exchange
Tres's basis in the machinery is $_____________ and their holding period begins:
e. 2009
f. 2010
g. Day after 2012
h. Day of exchange
Tres's basis in the service would be $______________
A. If services were capitalized
B. If services were expensed
And the holding period would start:
a. After services are completed
b. 2012
Question 2 -
Evan incorporates his sole proprietorship as Grand Corp and transfers its assets to Grand in exchange for all 100 shares of Grand stock and five $10,000 interest bearing notes. The stock has a $105,000 FMV. The notes mature consecutively on the first 5 anniversaries of the incorporation date. The assets transferred are as follows:
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Adjusted
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Assets
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Basis
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FMV
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Cash
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$6,200
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$6,200
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Equipment
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$125,000
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Minus: Accumulated depreciation
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(85,000)
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40,000
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80,600
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Building
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$90,000
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Minus: Accumulated depreciation
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(60,000)
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30,000
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41,850
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Land
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48,800
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26,350
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Total
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$125,000
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$155,000
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Requirements:
a. What are the amounts and character of Evan's recognized gains and losses?
b. What is Evans basis in the grand stock and notes?
c. What is Grands basis in the property received from Evan?
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Cash
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Equipment
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Building
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Land
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Asset's FMV
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% of total FMV
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Consideration rec'd in exchange for asset:
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Stock
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Notes
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Total Proceeds
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Minus: Adjusted basis
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Realized gain (loss)
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Character of gain (loss)
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What is Evan's basis in the Grand stock and notes?
Begin by determining the adjusted basis of the stock
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Adjusted basis of property transferred to the corporation
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Plus, or (Minus)
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Cash received from corp
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FMV of boot received
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Gain recognized by transferor
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Loss recognized by transferor
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Adjusted basis of stock received
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Evan's basis in the notes is $________________________
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Cash
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equipment
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building
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Land
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Transferors adjusted basis in propertytransferred to corporation
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Plus, or (Minus)
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Cash received from corp
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FMV of boot received
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Gain recognized by transferor
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Loss recognized by transferor
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Reduction for loss property
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Transferee corporation's basis in property
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Question 3 -
For seven years, Greece Corp has been owned entirely by Sam and Maura, who are husband and wife. Sam and Maura have a $182000 basis in their jointly owned Greece stock. The stock is SEC 1244 stock. They receive the following assets in liquidation of their corporation accounts receivable, $26000 FMV, a car, $19000 FMV, office furniture, $1000 FMV and $12000 cash.
PART A Begin by computing the gain or loss recognized using the following formula:
_____________________ minus ______________________= Gain(Loss) recognized
a. Adj basis of stock a. adj basis of stock
b. BV of assets rec'd b. BV of assets Rec'd
c. BV of stock c. BV of stock
d. Cash + BV of non-cash Property received d. Cash + BV of non-cash property received
e. Cash + FMV of non-cash property received e. Cash + FMV of noncash
f. Cash - FMV of noncash property received Property received f. Cash - FMV of non-cash Property received
PART B What is the amount of their gain or loss?
1. $
2. $
What is the character of these:
a. Capital gain
b. Capital loss
c. Ordinary gain under Sec 165(g)(3)
d. Ordinary gain under Sec 1244
e. Ordinary loss under Sec 165(g)(3)
f. Ordinary loss under Sec 1244
What would be the amount and character be if accounts receivable instead had $164000 FMV?
What is the basis for each property received in the liquidation in parts a and parts b:
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Property received
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Part a
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Part b
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Accounts receivable
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Car
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Cash
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Office furniture
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Stock
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Question 4 -
Paul owns 50 % of Hampton Corp stock in which he has a $210000 adjusted basis. Consider the following situations:
A. Paul is a cash method of accounting taxpayer. Hampton determines on December 24 of the current year this it will make a $240000 liquidating distribution to Paul. Hampton pays the liquidating distribution on Feb 8 of the next year.
B. Assume the same fact as in Part A except that Paul is an accrual method of accounting taxpayer.
Compute the gain or loss that Paul will report for each situation in the current year and in the next year.
Gain (Loss)
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Current Year
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Next Year
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A
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B
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Question 5 -
Great Corp is owned equally by Ray and Scott. Ray and Scott purchased their stock several years ago and have adjusted basis for their Great stock of $22000 and $34000 respectively. Each shareholder receives two liquidating distributions. The first liquidating distribution, make din the current year, results in each shareholder receiving one half interest in a parcel of land that has a $52000 FMV and a $22000 adjusted basis to Great Corp. The second liquidating distribution made in the next year results in each shareholder receiving $25000 cash.
Part A. What are the amount and character of Ray and Scotts recognized gain or loss for the current year and the next year?
Ray: Character Current Year $________________ Next Year $______________
a. Capital Gain
b. Capital loss
c. Ordinary income
d. Ordinary loss
e. Unrecovered basis
Scott: Character (same options) Current year $______________ Next Year $_______________
Part B. What is the basis of the land in Ray and Scotts hands?
Ray $____________________
Scott $_____________________
Part C. How would the answers to Parts A and B change if the land has a $16000 FMV instead of a $52000 FMV.
Ray: Character Current Year $________________ Next Year $______________
a. Capital Gain
b. Capital loss
c. Ordinary income
d. Ordinary loss
e. Unrecovered basis
Scott: Character (same options) Current year $______________ Next Year $_______________
Question 6 -
Parent corp own 100% of Subsidiary corp stock. The adjusted basis of its stock investment is $170000. A plan of liquidation is adopted and Subsidiary distributes to Parent assets having a $425000 FMV and a $330 adjusted basis (to Subsidiary) and liabilities in the amount of $40000. Subsidiary has $250000 E & P balance.
Part A. What are the amount and character of Subsidiary's recognized gain or loss on the distribution?
Parent does/does not recognize the $________ gain/loss on the distribution to Parent per ____
a. Sec 331
b. Sec 332(a)
c. Sec 334(b)(1)
d. Sec 337(a)
Part B. What are the amount and character of Parent's recognized and or loss on the surrender of the Subsidiary stock?
Parent does/does not recognize the $__________gain/loss on the distribution received per:__
a. Sec 331
b. Sec 332(a)
c. Sec 334(b)(1)
d. Sec 337(a)
Part C. What basis does Parent take in the assets?
$____________
Part D. The basis for the Parent stock: _______
a. Carries over to Subsidiary
b. Disappears and is not replaced
c. Disappears and is replaced by the basis of each of the individual's assets
d. Is increased by the basis of each of the individual's assets
e. In unchanged
Subsidiary's E&P balance: __________
a. Carries over to Parent
b. Decreases the E&P of Parent
c. Disappears and is not replaced
Question 7 -
Spring Corp owns 100 % of Fall Corp single class of stock. Its adjusted basis for the stock is $225000. After adopting a plan of liquidation, Fall distributes the following property to Spring: money, $70000, LIFO inventory $205000 FMV, and equipment, $115000 FMV. The inventory has a $250000 adjusted basis. The equipment originally cost $210000. Fall has claimed depreciation of $130000 on the equipment. Fall has a $160000 E&P balance and a $60000 NOL carryover on the liquidation date.
Part A. Fall does/ does not recognize the $_______gain realized on the distribution to Spring per _________.
a. Sec 331
b. Sec 332
c. Sec 334(b)(1)
d. Sec 337(a)
Part B. What are the amount and character of Spring's recognized gain or loss on its surrender of the Fall Stock_
Spring does/ does not recognize the $______ gain realized on the distribution received per ______
a. Sec 331
b. Sec 332
c. Sec 334(b)(1)
d. Sec 337(a)
Part C. What is Spring's basis in each noncash property?
Inventory _________________
Equipment__________________
Part D. What happens to Fall's E&P balance and NOL carryover following the liquidation?
a. Disappear per Sec 331
b. Disappear per Sec 381(a)
c. Carryover to Spring per Sec 331
d. Carryover to Spring per Sec 381(a)
Part E. What happens to Springs $225000 basis in the Fall stock?
a. Carries over to Fall
b. Disappears
c. Increased by the distribution amount
d. Remains the same
Attachment:- Assignment File.rar