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
