Assignment Part 1:
Problem 1:
A) What is the general rule for taxation of distributions by a corporation in redemption of its stock?
B) Identify the types of redemptions that will not be treated under the general rule
Problem 2: What is required for a stock redemption to be considered "not essentially quivalient to a dividend?
Problem 3: Abigail and Burton (unrelated individuals) own 50 shares each of the No exit corporation. There are no other outstanding shares. If Abigail redeems 25 shares, will the redemption qualify as a substantially disproportionate redemption?
Problem 4: Explain the rationale of the rules for attribution of stock ownership
Problem 5: What is the general rule regarding attribution of stock ownership to a redeemed shareholder from an entity in which the shareholder has an interest
Problem 6: Describe the requirements for waiving the family attribution rules in the case of a complete redemption
Problem 7: Claude, a 50 percent shareholder in the Monget Corporation, dies. The remaining stock in the corporation is owned by Claudes son, the sole beneficiary of Claudes estate. More than one half of the value of his adjusted gross estate consists of stock in the Longet Corporation. The attribution rules would cause Claudes estate to have taxable dividend income in the event stock was redeemed to raise cash for payment of estate tax. Explain how Code Sec 303 mitigates this situation
Problem 8: Explain how the accumulated earnings tax may apply to corporate money set aside to fund a Sec 303 redemption
Assignment Part 2:
Problem 1: Describe the classification system for the federal taxation of unincorporated businesses.
Problem 2: For what reasons may it be important to characterize an organization as a partnership
Problem 3: Explain the tax consequences to the contributing partners upon formation of partnership.
Problem 4: What are the consequences to the partnership and the partners when contributed property is subject to indebtedness?
Problem 5: Explain how the individual partners of a partnership are taxed
Problem 6: The Jomar partnership, owned equally by Joe and Marty, suffers a $50,000 loss this year. How will this loss be reported for tax purposes by
a) The partnership
b) The partners
Problem 7: How will the IRS treat special allocations of income or loss among partners if the allocations do not have substantial economic affect?
Problem 8: Jessica and Beatrice form a partnership and plan to share profits and losses on a 60/40 basis. Their partnership agreement contains no specific provision that governs how distributive shares of each particular income item will be determined. Explain how Jessica will compute her distributive share.
Problem 9: Explain the limitations on the deductibility of partnership losses by a partner
Problem 10: John contributed $10,000 to form J&B partnership with Bobby as an equal partner. The partnership suffers $30,000 loss this year.
a) What is johns distributive share of the loss
b) Compute the amount of loss John may currently deduct on whose personal tax return, assuming John and Bobby are equal partners.
Problem 11: John Decides to retire from the J& B Partnership, a retail drug store with inventory. If John sells his interest to Bobby at a gain, how will his gain on the sale be taxed
Problem 12: Assume that the ABS partnership agreement requires that the partnership liquidate the interest and any deceased or retiring partner. ABC is a service partnership. Describe the income tax consequences to the retiring partner and to the remaining partners of
A) Payments of the purchase price to the retiring partner for his or her interest in partnership property
B) Additional payments that are part of the retiring partners distributive share
Problem 13: Explain how limited partnerships and their partners are taxed
Problem 14: What guidelines are used to test the reality of a partnership arrangement involving acquisition of a partnership interest by one family member from another when
a) Capital is a material income producing factor
b) Capital is not a material income producing factor
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