Accounting Assignment
Nita Campbell
ac_435_wk_2_assignment_question.docxChapter 4
Question 36
Adam transfers property with an adjusted basis of $50,000 (fair market value of $400,000) to Swift Corporation for 90% of the stock. The property is subject to a liability of $60,000, which Swift assumes.
a. What is the basis of the Swift stock to Adam?
b. What is the basis of the property to Swift Corporation?
Chapter 5
Petrel Corporation has accumulated E & P of $85,000 at the beginning of the year. Its current-year taxable income is $320,000. On December 31, Petrel distributed business property (worth $140,000, adjusted basis of $290,000) to Juan, its sole shareholder. Juan assumes a $70,000 liability on the property. Included in the determination of Petrel’s current taxable income is $16,000 of income recognized from an installment sale in a previous year. In addition, the corporation incurred a Federal income tax liability of $112,000, paid life insurance premiums of $4,500, and received term life insurance proceeds of $150,000 on the death of an officer.
a. What is Juan’s gross income from the distribution?
b. What is the E & P of Petrel Corporation after the property distribution?
c. What is Juan’s tax basis in the property received?
d. How would your answers to (a) and (b) change if Petrel had sold the property at it fair market value, used $70,000 of the proceeds to pay off the liability, and distributed the remaining cash and any tax savings to Juan?
Chapter 6
Question 41
Information from 39 to gain answer for 41:
Julio is in the 33% tax bracket. He acquired 2,000 shares of stock in Gray Corporation seven years ago at a cost of $50 per share. In the current year, Julio received a payment of 150,000 from Gray Corporation in exchange for 1,000 of his shares in Gray. Gray has E & P of $1 million. What income tax liability would Julio incur on the $150,000 payment in each of the following situations? Assume that Julio has no capital losses.
41
Assume in Problem 39 that Julio has a capital loss carry over of $50,000 in the current tax year. Julio has no other capital gain transactions during the year. What amount of the capital loss may Julio deduct in the current year in the following situation?
a. The $150,000 payment from Gray Corporation is a qualifying stock redemption for tax purposes (i.e., receives sale or exchange treatment).
b. The $150,000 payment from Gray Corporation does not qualify as a stock redemption for tax purposes (i.e., does not receive sale or exchange treatment).
Chapter 4
Question 36
Adam transfers property with an adjusted basis of $50,000 (fair market value of $400,000) to
Swift Corporation for 90% of the stock. The property is subject to a liability of $60,000, which
Swift assumes.
a.
W
hat
is the basis of the Swift stock to Adam?
b.
What is the basis of the property to Swift Corporation?
Chapter 5
Petrel Corporation has accumulated E & P of $85,000 at the beginning of the year. Its current
-
year taxable income is $3
2
0,000. On December 3
1, Petrel distributed business property (worth
$
140,000, adju
sted basis of $290,000) to Juan,
i
ts sole shareholder
. Juan assumes a $70,000
liability on the property. Included in the determination of Petrel
’
s current taxab
le income is
$16,000 of income recognized from an installment sale in a previous year. In addition, the
corporation incurred a Federal income tax liability of $112,000, paid life insurance premiums of
$4,500, and received term life insurance proceeds of $1
50,000 on the death of an officer.
a.
What is Juan
’
s gross income from the distribution?
b.
What is the E & P of Petrel Corporation after the property distribution?
c.
What is Juan
’
s
tax basis in the property received?
d.
How would your answers to (a) and (b) cha
nge if Petrel had sold the property at it fair
market value, used $70,000 of the proceeds to pay off the liability, and distributed the
remaining cash and any tax savings to Juan?
Chapter 4
Question 36
Adam transfers property with an adjusted basis of $50,000 (fair market value of $400,000) to
Swift Corporation for 90% of the stock. The property is subject to a liability of $60,000, which
Swift assumes.
a. What is the basis of the Swift stock to Adam?
b. What is the basis of the property to Swift Corporation?
Chapter 5
Petrel Corporation has accumulated E & P of $85,000 at the beginning of the year. Its current-
year taxable income is $320,000. On December 31, Petrel distributed business property (worth
$140,000, adjusted basis of $290,000) to Juan, its sole shareholder. Juan assumes a $70,000
liability on the property. Included in the determination of Petrel’s current taxable income is
$16,000 of income recognized from an installment sale in a previous year. In addition, the
corporation incurred a Federal income tax liability of $112,000, paid life insurance premiums of
$4,500, and received term life insurance proceeds of $150,000 on the death of an officer.
a. What is Juan’s gross income from the distribution?
b. What is the E & P of Petrel Corporation after the property distribution?
c. What is Juan’s tax basis in the property received?
d. How would your answers to (a) and (b) change if Petrel had sold the property at it fair
market value, used $70,000 of the proceeds to pay off the liability, and distributed the
remaining cash and any tax savings to Juan?
