C corp formation

Question 1

basis of property to C corp:

Answer 1

greater of:
shareholder’s basis in property + recognized gains by SH
debt assumed by corp

Question 2

shareholder’s basis in corp

Answer 2

basis of property contributed - debt assumed by corp
cash contributed
FMV of services contributed (taxed as ordinary income)

Question 3

gain recognized by shareholder

Answer 3

excess mortgage over basis
boot received

Question 4

Mary purchases 20% of Joey’s Pizza shop contributing:

Building (basis): $80,000
Building (FMV): $100,000
Mortgage associated with the building: $90,000
Cash received by Mary: $20,000

calculate Joey’s Pizza Shop’s basis in the building:

Answer 4

$110,000

greater of:
shareholder’s basis + gain recognized (capital gain + cash received) = $110,000
debt assumed = $90,000

Question 5

Mary purchases 20% of Joey’s Pizza shop contributing:

Building (basis): $80,000
Building (FMV): $100,000
Mortgage associated with the building: $90,000
Cash received by Mary: $20,000

calculate Mary’s basis in the corp:

Answer 5

$0 = $80,000 - $90,000

Question 6

Mary purchases 20% of Joey’s Pizza shop contributing:

Building (basis): $80,000
Building (FMV): $100,000
Mortgage associated with the building: $90,000
Cash received by Mary: $20,000

calculate Mary’s recognized gain in the corp:

Answer 6

$30,000

$10,000 capital gain ($80,000 basis - $90,000 debt assumed by corp)
$20,000 cash received

Question 7

in Year 12, a Corp had an NOL of $100,000. in Year 13, the Corp expects to have taxable income of $100,000 prior to NOL deduction. how can the Corp avoid underpayment of taxes in Year 13?

Answer 7

pay 100% of est tax liability for the current year

cannot pay est taxes based on last year because no income