Corp Formation Flashcards
C-corp: during formation, how do you calculate any amount taxable to the SH on contributed property?
No G/L if over if >80% owned immediately after purchase.
If not:
Gain = boot received
C-corp: During formation, what amount is taxable to the corporation?
Not taxed.
If SH provides services, taxable @ FMV
C-corp: During formation what is the formula to calculate the SH basis?
NBV \+ Cash contributions \+ FMV services rendered \+ Gain recognized by SH - Boot received - Debt assumed by corp = SH basis
C-corp: what is the calculation of the corporations basis in a contributed asset?
Property = greater of NBV of property (+ any gain recognized by the SH) or debt received by the corporation (less cash received)
Aggregate NBV > Aggregate FMV, corps basis = agg FMV
C-corp: what is the tax effect of a non liquidating distribution to a SH in the following situations:
To the extent of Current & Accum E&P?
Distributions in excess of E&P?
Distributions in excess of basis?
Distributions of property (How is the amount calculated, and what is the type of income)?
Stock dividends?
Current & Accum E&P = Taxable Div Excess of E&P = non taxable ROC Excess of basis = taxable capital gain Property/ cash dividends = FMV taxed as Ordinary Income Stock dividends = only taxable if option
C-corp: What is the corporations tax on non liquidating distributions?
How should the gain be categorized regarding E&P?
Only recognize gains in appreciated property (as if sold)
FMV - NBV = GAIN
If debt > FMV, debt = FMV
Add gain to Current E&P
C-corp: What is a shareholders basis in property from non liquidating distributions?
Basis in property distribution = FMV
Dividends in excess of Current E&P reduce basis
C-corp: What is the tax treatment to the shareholder on a liquidating distribution?
Proceeds or FMV
(Liabilities assumed)
(Stock basis)
= Taxable gain
C-corp: What is a shareholders basis in a liquidating distribution?
FMV
C-corp: What is a corporations tax impact from a liquidating distribution of property?
Sale price/ FMV
(Liabilities assumed)
(NBV)
= Taxable G/L
S-corp: During formation, what is the tax effect on the shareholder from contributed property?
If 80% or more is owned by a control group, AND no receipt of Boot, then no G/L
G/L if boot received - limited to lesser of realized gain, or FMV of boot received
S-corp: During formation what is the tax effect to the corporation from contributed property?
Not taxed
S-corp: During formation how is the shareholder’s basis calculated?
Adjusted basis of shareholder
+ Gain recognized
- Boot received
- Liabilities transferred to corp (non-recourse libailities do NOT increase shareholder’s at risk basis, but does increase tax basis)
S-corp: During formation, how do you calculate the corporation’s basis in contributed property?
Shareholder’s basis
+ Any gain recognized by the Shareholder
S-corp: During non-liquidating distributions, what is the tax impact to the shareholder? To the extent of: - AAA (Accum Adj Acct) - aka RE - If converted from C-corp w/ E&P - Stock basis - Excess of stock basis
To the extent S Corp AAA is not subject to tax- decrease basis in stock
To extent of (converted) C Corp w/ E&P (leftover): Taxed as dividend - Does not reduce basis in stock
To extent of stock basis: Not subject to tax - reduces basis in stock (ROC)
Excess of stock basis - LTCG
S-corp: During non-liquidating distributions, what is the tax impact on the corporation?
Taxed on distributions from leftover RE (no losses)
Property taxed like C-corp
S-corp: During non-liquidating distributions, what is the effect on basis for the shareholder?
AAA = Accum Adjustments Account (RE)
Dividends out of RE of C corp taxable as dividend, but does not reduce basis
Basis is FMV of property received
Stock basis v.s. At-Risk basis
At risk includes separately stated items
S-corp: During non-liquidating distributions, what is the formula to calculate the effect on basis to the corporation?
Initial basis (Contributions) \+ Income \+ Additional contributions - Distributions - Losses = Partner debt basis
S-corp: During liquidating distributions, how do you calculate the tax impact on the shareholder?
Cash received \+ FMV of property received - Liabilities assume Amount realized - Basis in stock = Taxable G/L
S-corp: During liquidating distributions, what is the effect on basis to the shareholder?
Adjust the basis for the gain on the distribution before the G/L is calculated
S-corp: During liquidating distributions, how do you calculate the tax impact on the s-corp?
FMV
- Basis
- Liabilities
= Taxable G/L
Partnership: During formation, how do you calculate the tax impact of contributed property by the partner?
General rule: No G/L recognized
Exception: Services provided for capital (ordinary inc)
Excess liability is taxable boot, only subtract liabilities assumed by other partners
Partnership: During formation, how do you calculate the partner’s initial basis?
Cash contributions \+ Property (Adjusted basis) \+ Services provided (FMV) - Liabilities transferred or assumed by other partners \+ Partners share of liabilities assumed = Partner's initial basis
Partnership: During formation, what is the tax impact on the corporation?
Contributions are NOT taxed
Partnership: During formation, how do you calculate the basis in contributed property for the corporation?
Carryover basis
+ Any gain recognized by incoming partner
Partnership: During a non-liquidating distribution, how do you calculate the tax impact to the partner?
Taxed ONLY if cash distributed is greater than basis (Factor in cash first, then property)
Excess property, not taxable
Partnership: During a non-liquidating distribution, how do you calculate the effect on a partner’s basis?
Basis reduced by cash THEN by adjusted basis of property.
Cannot exceed 0 with property - basis is lesser of remaining partnership basis OR NBV of property
Partnership: During a non-liquidating distribution, what is the tax impact on the partnership?
Not taxed
Partnership: During a non-liquidating distribution, what is the impact on basis to the corporartion?
No effect
Partnership: During a liquidating distribution, how do you calculate the amount taxed to the partner?
Recognize a gain ONLY to the extent that money received exceeds basis
Recognize loss, if money, unrealized receivables, or inventory are the only assets received and partner’s basis exceeds the assets
Partnership: During a liquidating distribution, what is the effect on the partners basis?
Step 1: Basis - Partnership basis in assets: Beginning capital account \+ Share of income (Loss) = Partner's capital account Partner's share of liabilities
Step 2: Adjust basis of any “non-hot” assets back down to FMV (If FMV>NBV)
Adjusted basis in partnership interest
- cash distributions
Step 3: Allocate any basis (Gain) among non-hot assets
Remaining basis to be allocated to assets distributed
Hot assets = Inventory, A/R
A partnership may elect to have a tax year other than the generally required tax year if the deferral period for the tax year elected does not exceed how long?
3 months
