acc 455
DAHal7
acc_455_week_2_new.docxC; 2-3
Bruce and Bob organize Black LLC on May 10 of the current year. What is the entity’s default tax classification? Are any alternative classification(s) available? If so, (1) how do Bruce and Bob elect the alternative classification(s) and (2) what are the tax consequences of doing so?
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C:254 |
On March 1 of the current year, Alice, Bob, Carla, and Dick form Bear Corporation and transfer the following items:
Alice purchased the land and building several years ago for $12,000 and $50,000, respectively. Alice has claimed straight-line depreciation on the building. Bob also receives a Bear note for $10,000 due in three years. The note bears interest at the prevailing market rate. Bob purchased the equipment three years ago for $50,000. Carla also receives $5,000 cash. Carla purchased the van two years ago for $20,000. a. Does the transaction satisfy the requirements of Sec. 351? b. What are the amount and character of the gains or losses recognized by Alice, Bob, Carla, Dick, and Bear? c. What is each shareholder’s basis in his or her Bear stock? When does the holding period for the stock begin? d. What is Bear’s basis in its property and services? When does the holding period for each property begin?
C:2‑55
On June 3 of the current year, Eric, Florence, and George form Wildcat Corporation and transfer the following items:
Item Transferred Transferor Asset Basis to Transferor FMV Number of Common Shares Issued Eric Land $200,000 $50,000 500 Florence Equipment –0– 25,000 250 George Legal services –0– 25,000 250 Eric purchased the land (a capital asset) five years ago for $200,000. Florence purchased the equipment three years ago for $48,000. The equipment has been fully depreciated.
C:2‑56
Assume the same facts as in Problem C:2-55.
Under what circumstances is the tax result in Problem C:2-55 beneficial, and for which shareholders? Can you suggest ways to enhance the tax benefit? Does the transaction meet the requirements of Sec. 351? What are the amount and character of the gains or losses recognized by Eric, Florence, George, and Wildcat? What is each shareholder’s basis in his or her Wildcat stock? When does the holding period for the stock begin? What is Wildcat’s basis in the land, equipment, and services? When does the holding period for each property begin? |
