R3/R4

Question 1

Partnership liquidation distibution

Answer 1

The basis of property received in a liquidating distribution is the adjusted basis less the cash received.

Question 2

Consolidated returns

Answer 2

When a corporation receives a dividend from its wholly owned subsidiary, the dividend is included in gross income and a 100% dividends-received deduction is allowed. This makes the dividend that was received “taxable” with an offsetting 100% dividends-received deduction allowed, and so makes the net amount equal to zero.

Question 3

long term capital loss changes its identity

Answer 3

Corporate income tax: When a capital loss is carried to another year, it is treated as a short-term loss. It does not retain its original identity. A corporation can carry a capital loss back three years, but the carryforward period is only five years. Capital losses can only offset capital gains.

Question 4

Distributions

Answer 4

A distribution from a C corporation to a shareholder cannot be treated by the shareholder as a capital loss. Nonliquidating distributions to a shareholder are recorded at the fair market value on the date of distribution. To the extent of earnings and profit, the distribution is a taxable dividend (i.e., ordinary income). Any excess is a nontaxable return of capital and then a capital gain. Treating the distribution as a capital loss is not an option.

Question 5

liquidations Question #101214

Answer 5

The shareholder’s basis in property received as a result of a nonliquidating property dividend is the fair market value (FMV) on the date of the distribution. The corporation will recognize a gain for the difference between the FMV on the date of the distribution and the adjusted basis of the property at the date of the distribution. Corporations will not recognize a loss on a nonliquidating property dividend.

Question 6

Sale of partnership interest #101431

Answer 6

The total gain on the sale of his partnership is $24,000 ($28,000 cash + $15,000 relief of his share of liabilities less basis of $19,000). Unrealized receivables of $6,000 are treated as ordinary income—the remaining $18,000 is capital gain.

Question 7

Trust

Answer 7

The trust will automatically end on the death of Hardy. A trust terminates when the beneficiary has died. Hardy is the only beneficiary, so the trust expires when he passes.

Question 8

S corp

Answer 8

The owner’s adjusted basis in the stock of an S corporation is increased by the owner’s share of profits and decreased by the owner’s share of losses, and is not affected by the entity’s bank loan increases and decreases.
The owner’s adjusted basis in a partnership is increased by the owner’s share of profits and decreased by the owner’s share of losses, and is also increased for the partner’s share of partnership debt.
The owner’s adjusted basis in a C corporation’s stock is not adjusted for income or loss of the C corporation.
The members of a limited liability company do not bear personal liability for its debts.

Question 9

LLC VS Scorp Question #101217

Answer 9

n S corporation recognizes a gain on the distribution of appreciated property to a shareholder. The transaction is treated as a “sale” of the property to the shareholder at fair market value (FMV).
Distributions from a limited liability company (LLC) are assigned a portion of adjusted basis of the LLC interest.

Question 10

Method of accounting

Answer 10

A C corporation with sales over $5 million must use the accrual method of accounting. Therefore, because Dart is a C corporation with sales over $20 million per year for the past three years, Dart must use the accrual method.

Question 11

Partnership termination

Answer 11

When a partnership terminates yet some of the partners continue the partnership, there will have been a “deemed” distribution from the old partnership and a “deemed” recontribution of assets to the new partnership. Therefore, both statements I and II are true.

Question 12

Tax exempt interest 101373

Answer 12

Not included in partnership income but added to basis

Question 13

Corp liquidation

Answer 13

When a corporation completely liquidates, the corporation will recognize a gain or loss “as if” the property were sold at fair market value.

Question 14

Question #101599 c v S corp incom

Answer 14

look into question

Question 15

liquidation- Question #101455

Answer 15

allocaton basiss

Question 16

Partnership

Answer 16

Guaranteed payments are only deducted from the respective partners basis

Question 17

Partnership

Answer 17

his represents Smith’s 50% of the $800 life insurance premium for a policy for which the partnership is the beneficiary. Even though this is not a partnership operating expense, it still decreases Smith’s partnership basis.

Question 18

partnershio

Answer 18

This represents Smith’s 50% of the $200 penalty for late payment of taxes. Again, although this is not a tax-deductible expense, it does decrease the partners’ basis account.

Question 19

Partnership basis - land purchase

Answer 19

The purchase of the land by the partnership does not affect the basis of the partner. It is merely an asset exchange of the partnership’s cash for land that does not affect the basis or income of the partnership.

Question 20

Schedule M2

Answer 20

Schedule M-2 is the “Analysis of Unappropriated Retained Earnings per Books,” which corresponds to line 25 of Schedule L (the balance sheet). This schedule is concerned with changes that affect the equity section of the balance sheet.

Question 21

schedule M1

Answer 21

Remember you are adjusting book income to get to taxable incoem

Question 22

Constructive ownership

Answer 22

For purposes of determining constructive ownership of stock for a PHC, IRC Section 267(c) defines family to include brothers and sisters, spouse, ancestors (parents and grandparents), and lineal descendants (children and grandchildren). Abbie owns 245 shares (200 + 45 from her brother).

Question 23

partnership

Answer 23

Per the Revised Uniform Partnership Act (RUPA), each partner is entitled to an equal share of the profits (and losses) if not otherwise addressed in the partnership agreement.

Question 24

Partnership

Answer 24

When Poe sold her entire interest to an unrelated party on February 4, Year 5, there was still a partnership between Dean and Ritt. When Dean sold his 25% interest in Able to another unrelated party on December 20, Year 5, the partnership terminated because over half of the partnership was sold within a 12-month period.
Termination of a partnership occurs if at least half of the total interest in partnership capital and profits is sold within a 12-month period.