interest. What amount of gain or income is each owner required to recognize under each of the following alternative situations? [Hint Look at §351 and §721.] Note: Leave no answer blank. Enter zero if applicable.
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![Required information
[The following information applies to the questions displayed below.]
Mustafa, Mickayla, and Taylor are starting a new business (MMT). To get the business started, Mustafa is contributing
$235,000 for a 40 percent ownership interest, Mickayla is contributing a building with a value of $235,000 and a tax basis
of $158,750 for a 40 percent ownership interest, and Taylor is contributing legal services for a 20 percent ownership
interest. What amount of gain or income is each owner required to recognize under each of the following alternative
situations? [Hint. Look at §351 and §721.]
Note: Leave no answer blank. Enter zero if applicable.
c. MMT is formed as an LLC (taxed as a partnership).
Gain or income to be recognized
Mustafa
Mickayla
Taylor](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6ccdcf79-78d2-4137-a0b2-392ece22d1a5%2Fc258f69a-bc5e-4de2-ae3a-9f6be1f7b5bd%2Fxm56j1_processed.png&w=3840&q=75)
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- Mickey, Mickayla, and Taylor are starting a new business (MMT). To get the business started, Mickey is contributing $215,000 for a 40 percent ownership interest, Mickayla is contributing a building with a value of $215,000 and a tax basis of $153,750 for a 40 percent ownership interest, and Taylor is contributing legal services for a 20 percent ownership interest. What amount of gain is each owner required to recognize under each of the following alternative situations? [Hint: Look at IRC §351 and §721.] A. MMT is formed as a C corporation. B. MMT is formed as an S corporation. C. MMT is formed as an LLC.6.Matthew and Venice decide to form their new retail business as an LLC. Each will receive an equal profits (loss) interest by contributing cash, property, or both. In addition to the members' contributions, their LLC will obtain a $35,000 nonrecourse loan from Simple Bank at the time it is formed. Matthew contributes cash of $4,000 and a building he bought as a storefront for the retail. The building has an FMV of $65,000 and an adjusted basis of $29,000 and is secured by a $34,000 nonrecourse mortgage that the LLC will assume. What is Matthew's outside tax basis in his LLC interest? Show computation.Madam Phew is one of the developer company directors, Availing Property Sdn Bhd. Madam Phew acquired a piece of raw land in 2018 with the purpose to distribute the land for 3 of her children. She consumed her own saving and 40% of the balanced of the acquisition was financed by bank borrowings. In 2019, Madam Phew develop the land for residential use. In 2020, Madam Phew received an interesting offer from Availing Property Sdn Bhd to purchase the land. She sold the land amounting to RM1,250,000 to Availing Property Sdn Bhd in 2021. Madam Phew submitted the Real Property Gains Tax (RPGT) return instead of income tax return to Inland Revenue Board (IRB) for the disposal. Required: Discuss the difference between RPGT and income tax, and state the argument whether the disposal is subject to tax?
- Colin owns and operates Colin's Creative Coaching (3C), a sole proprietorship. 3C sponsors a 401(k)/ profit-sharing plan. Colin had net income of $200,000 and paid self-employment taxes of $20,000 (assumed) during the year. Assuming Colin is over the age of 50, what is the maximum amount that Colin and his company can contribute on his behalf to the plan for 2020? a. $25,000. b. $57,000. C. $63,500. d. $64,000.Check my work Wozniacki and Wilcox form Jewel LLC, with each investor receiving a one-half interest in the capital and profits of the LLC. Wozniacki receives his one-half interest as compensation for tax planning services that he rendered prior to the formation of the LLC. Wilcox contributes $50,000 cash. The value of a one-half capital interest in the LLC (for each of the parties) is $50,000. Compute Wozniacki’s realized and recognized gain from joining Jewel. Generally, formation of LLC is treated the same as a partnership and no gain or loss is recognized at formation. One of the exceptions to this provision is when capital interest is received as compensation for services rendered. When this happens, it is not a tax-deferred transaction because services are not treated as “property” Since Wozniacki receives his half interest in the partnership for services rendered with a FMV of $50,000, he has a realized and recognized gain of $50,000 of ordinary income…Joe, June, and Jim—coworkers—decide that they want to start their own business. Joe has $200,000 to contribute, June has equipment valued at $100,000 (basis = $90,000), and Jim has real estate suitable for the business valued at $200,000 (basis = $110,000). Joe and Jim are each to receive 40 percent of the corporate stock, and June is to receive 20 percent. Joe and June transfer title to their property to the corporation immediately. When Jim tries to transfer title to the real estate to the corporation, several legal errors in the title are discovered, and he is unable to transfer title until the errors are corrected. Correcting the errors takes more than 14 months. In the meantime, the corporation begins operating, renting the building from Jim. In the 15th month, Jim is able to transfer title and receive his stock. Is Jim eligible to use the nonrecognition provisions of Section 351 on this transfer?
- 9. Angela and Thomas are planning to start a new business. Thomas will invest cash in the business but not be involved in day-to-day operations. Angela plans to work full-time overseeing business operations. The two currently project that the business will generate $200,000 of annual taxable income before consideration of any payments to Angela for her services. Both agree that Angela's services are worth $100,000 Angela and Thomas plan to form a passthrough entity but are unsure whether to choose a partnership or an S corporation. In either case, they will be equal owners of the entity. Given their other sources of income, both Thomas and Angela have a 37 percent marginal tax rate on ordinary income. (Ignore any payroll or self employment tax consequences.) a. If the business is operated as a partnership, calculate ordinary income allocated to each owner, and explain the treatment by the partnership and by Angela of her $100,000 payment for services. b. If the business is operated as…Donald and Melania agree to go into business together. Donald will contribute a building with a FMV of $600,000 and a tax basis of $200,000 in return for 50 percent of the stock in the corporation. The corporation will assume a $300,000 mortgage on the building. Melania will contribute $300,000 cash in return for 50% of the stock of the corporation. How much gain, if any, does Donald recognize on the transfer of his building assuming the transaction qualifies under IRC Section 351?Allen, Barry, and Carl are incorporating their real estate sales partnership, which will become the ABC Corporation. Allen will contribute a building with a basis of $25,000 and a fair market value of $50,000 in return for 500 shares. Barry and Carl will each contribute $50,000 cash for 500 shares each. To retain the services of their top sales associate, Drake, they will provide 500 shares to him in return for his services. Explain the tax consequences of these transactions for each shareholder, and the corporation.
- Santana Rey created Business Solutions on October 1, 2019. The company has been successful, and Santana plans to expand her business. She believes that an additional $86,000 is needed and is investigating three funding sources. a. Santana’s sister Cicely is willing to invest $86,000 in the business as a common shareholder. Because Santana currently has about $129,000 invested in the business, Cicely’s investment will mean that Santana will maintain about 60% ownership and Cicely will have 40% ownership of Business Solutions. b. Santana’s uncle Marcello is willing to invest $86,000 in the business as a preferred shareholder. Marcello would purchase 860 shares of $100 par value, 7% preferred stock. c. Santana’s banker is willing to lend her $86,000 on a 7%, 10-year note payable. She would make monthly payments of $1,000 per month for 10 years. Required 1. Prepare the journal entry to reflect the initial $86,000 investment under each of the options (a), (b), and (c). 2. Evaluate the three…[The following information applies to the questions displayed below.] Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $205,000 in return for 50 percent of the corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted tax bases in return for 50 percent of the corporation's stock: (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) Building Land Total FMV $ 76,875 179,375 $ 256,250 To equalize the exchange, Wizard Corporation paid Hermione $51,250 in addition to her stock. Gain or loss realized Adjusted Tax Basis $ 20,500 82,000 $ 102,500 :. What amount of gain or loss does Hermione realize on the formation of the corporation? What amount, if any, does she recognize? $1. Teddy, Bobbie, Alex, and Gabbie organized a partnership called Four Sisters. Their business is engaged in providing wedding services. Teddy and Bobbie contributed cash of P600,000 each. Alex contributed building which she inherited from her father three (3) years ago. For the transfer tax purposes, the value of the building was P900,000. A week before the partnership was formed, several buyers signify their intention of buying the building for P920,000. The building has been subjected to a mortgage with a carrying amount of P200,000, which will be assumed by the partnership. Gabbie, being an event planner, contributed her skills and knowledge to the partnership. The partners agreed that Gabbie would be given a salary of P15,000. She will also receive 20% of the remaining profits. Questions: a. What is the value of the building contributed by Alex? Justify your answer in no more than three (3) sentences. b. Give the entry to be made at the date of formation. 2. Cyril, Joseph, and…
