Tax Chapter 13 Questions

10. Gains/Losses are "generally" recorded at the same amount for both Capital Accounts and Tax Basis.

A corporation cannot use net operating losses between C corporation years and S corporation years, with the only exception that net operating losses from C corporation years can reduce net recognized built-in gains from S corporation years.

25-7 If a loss cannot be accrued in the period when ti is probable that an asset had been impaired or a liability had been incurred because the amount of loss cannot be reasonable estimated, the loss shall be charged to the income of the period in which the loss can be reasonably estimated and shall not be charged retroactively to an earlier period. All estimated losses for loss contingencies shall be charged to income rather than charging some to income and others to retained earnings as prior period adjustments.”

Section 360-10-35-17 of the Code states that an impairment loss shall be recognized if the carrying value of a fixed asset is not recoverable and exceeds its fair value. The carrying value of the fixed asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and disposal of the asset. An impairment loss shall be measured by the amount by which the carrying value exceeds the fair value.

As discussed above, if indicators of impairment exist for an asset (group) to be held and used, an entity determines whether the sum of the estimated undiscounted future cash flows attributable to the asset (group) in question is less than its carrying amount. If those undiscounted cash flows are less than

In 2013 Marianne sold land, building and equipment with a combined basis of $150,000 to an unrelated third party and in return received an installment note of $80,000 per year for five years. Of the $250,000 gain on sale, $150,000 was classified as Section 1245 gain and the remaining $100,000 was Section 1231 gain. In 2013, Marianne had a capital loss carryover of $60,000, $50,000 of which she used to offset her Section 1231 gain; she recognized no Section 1245 gain. The following year she recognized $40,000 of 1245 gain and $10,000 of Section 1231 gain which she promptly offset with the last $10,000 of the capital loss carryover. In 2015, she recognized $50,000 Section 1245 gain and no Section 1231 gain.

Moreover, ASC 250-10-45-17 presents that “A change in accounting estimate shall be accounted for in the period of change if the change affects that period only or in the period of change and future periods if the change affects both. A change in accounting estimate shall not be accounted for by restating or retrospectively adjusting amounts

0 A publicly held corporation must have a charitable purpose, but a public corporation need not have a charitable purpose

Although gross uncollectible accounts are a combination of charity care and uncollectible debt, implications generally occur when recording on a healthcare institutions bottom line, further, charity care and bad debt uncollectible must be recorded and documented independently. Implications stem from recording and classification of uncompensated care. Improper classification of charity care is often mistaken for as bad debt in turn leads to bad debt amounts being over the profit amount when recorded on financial

Section 362(e)(2) states that if the transferors adjusted basis of the property transferred is greater than the fair market value right after the transaction, then the basis of the property transferred should obtain a basis that does not exceed the fair market value right after the transfer. In any case, the transferor has the option to select an irrevocable election that allows them to apply the reduction to their stock basis received rather than to the transferee’s basis in the property received. This statute eliminates the transferee’s built-in loss and it does not allow the opportunity that the taxpayer and the corporation can undertake a transaction that results in a “duplicated loss.” Federal Tax Reg. §1.362-4 along with Section 362(e)(2) were established “to prevent the duplication of new loss in transfers undertaken under Section 351.” Subsequently, Congress also included Section 362(e)(2)(C) which permits the transferor and the corporation to make the election and reduce the tax basis rather than to the property received by the corporation. If Mrs. Zhee accepts this election, then the corporation would take the basis of $60,000 for the machine and Mrs. Zhee would then reduce her stock to the fair market value of $40,000. Nonetheless, Mrs. Zhee is not allowed to reduce her stock basis more than the current fair market value. If Mrs. Zhee and the corporation decide not to make the election, then the transaction will not be made pursuant to 362(e)(2) and 362(e)(2)(c). Additionally, the difference will not be recognized by both the transferor and transferee as provided under the duplication loss

The new Wahoo Inc. emerged from bankruptcy on August 30, 2015, and it plans to make an acquisition within 6 months. Due to the planned acquisition, Wahoo’s revenue and profit are anticipated to increase 15% and 12% respectively. Therefore the company would prefer to preserve the NOL carryovers to offset the future taxable income. However, since Wahoo’s reorganization was essentially Type G reorganization – bankruptcy fillings, Section 382 limitation can come into play regarding the NOL it can deduct in subsequent years. The research question hinges upon the treatment of

11. What’s the basis of gift property? A taxpayer’s original basis for gift property is the same as the property’s adjusted basis in the hands of the donor or the last preceding owner by whom it was not acquired by gift. However, if the property’s FMV at time of gift is less than adjusted basis to the donor, then basis for determining loss is the FMV at the time of the gift. CODE SECTION 1015

Section 351(c)(2) allows shareholders to dispose of all or part of the transfers stock without preventing the corporations Section 351 transaction from satisfying the “ control immediate after” requirement (4). Section 351(d) states that there are times when services, certain indebtedness, and accrued interest not treated as property as per James v. Commissioner, 53 T.C. 63 (1969); cf. Hospital Corporation of America v. Commissioner, 81 T.C. 520

Accrual method corporation. A corporation using an accrual method of accounting can choose to deduct unpaid contributions for the tax year the board of directors authorizes them if it pays them by the 15th day of the 3rd month after the close of that tax year. Make the choice by reporting the contribution on the corporation's return for the tax year. A declaration stating that the board of directors adopted the resolution during the tax year must accompany the return. The declaration must include the date the resolution was adopted.

In ASC 958-605 states that “contributions received” are to be recognized in the period received. This is relatively intuitive, but causes concern when related to items with unidentifiable value. The FASB states that contributions have no value unless they can be “used internally by the not-for-profit entity” or “sold by the NFP” (FASB, 2015). Items that do not fall under these two categories have no value and should not be recognized. If the not-for-profit decides to accept these gifts, they will often classify the items as collections.