Pantone Corporation is a calendar year taxpayer. Dave owns one-third (100 shares) of Pantone stock. His basis in the stock is $12,000. Sylvia owns two-thirds (200 shares) of Pantone stock. Her basis in the stock is $24,000. On Ju Pantone distributes $25,000 to Dave and $65,000 to Sylvia. Read the requirements Remaining distribution Return of capital Capital gain (loss) Remaining stock basis 12000 24000 Requirement b. Determine the tax consequences of the cash distributions to Dave and Sylvia if current E&P is $32,000 and accumulated E&P is $31,000. (Complete all input fields. For zero amounts, make sure to enter "0" in the a not round intermediary calculations. Only round the amount you input in the cell to the nearest dollar.) Dave Sylvia - X 25000 65000 Requirements Distribution Dividend income Determine the tax consequences of the cash distributions to Dave and Sylvia in each of the following independent situations: a. Current E&P of $64,000; accumulated E&P of S140,000. Remaining distribution Return of capital b. Current E&P of $32,000; accumulated E&P of S31,000. Capital gain (loss) Remaining stock basis

Pantone Corporation is a calendar year taxpayer. Dave owns one-third (100 shares) of Pantone stock. His basis in the stock is $12,000. Sylvia owns two-thirds (200 shares) of Pantone stock. Her basis in the stock is $24,000. On Ju Pantone distributes $25,000 to Dave and $65,000 to Sylvia. Read the requirements Remaining distribution Return of capital Capital gain (loss) Remaining stock basis 12000 24000 Requirement b. Determine the tax consequences of the cash distributions to Dave and Sylvia if current E&P is $32,000 and accumulated E&P is $31,000. (Complete all input fields. For zero amounts, make sure to enter "0" in the a not round intermediary calculations. Only round the amount you input in the cell to the nearest dollar.) Dave Sylvia - X 25000 65000 Requirements Distribution Dividend income Determine the tax consequences of the cash distributions to Dave and Sylvia in each of the following independent situations: a. Current E&P of $64,000; accumulated E&P of S140,000. Remaining distribution Return of capital b. Current E&P of $32,000; accumulated E&P of S31,000. Capital gain (loss) Remaining stock basis

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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15.Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $200,000 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.) FMV Adjusted Tax Basis Building $ 75,000 $ 20,000 Land 175,000 80,000 Total $ 250,000 $ 100,000 To equalize the exchange, Wizard Corporation paid Hermione $50,000 in addition to her stock. What amount of gain or loss does Ron recognize on the formation of the corporation? Gain or loss recognized
Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $305,000 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.) Adjusted Tax FMV Basis $ 114,375 266,875 $ 381,250 $ 30,500 122,000 $ 152,500 Building Land Total To equalize the exchange, Wizard Corporation paid Hermione $76,250 in addition to her stock. Assume Hermione's adjusted tax basis in the land was $305,000. f. What amount of gain or loss does Hermione realize on the formation of the corporation? What amount, if any, does she recognize? Gain or loss realized Gain or loss recognized $ 22,875
2. Rye Corporation is owned 55% (55 shares) by Roger, 30% (30 shares) by Yolanda and 15% (15 shares) by Eric. Rye has E&P of $400,000. Roger's stock basis is $200,000, Yolanda's stock basis is $130,000 and Eric's stock basis is $80,000. a. What is the tax result to Roger if Rye redeems 30 shares for $350,000? Yolanda is Roger's wife. b. What is the tax result to Roger if Rye redeems 45 shares for $500,000? Yolanda is Roger's wife. c. What is the tax result to Roger if Rye redeems 55 shares for $600,000? Yolanda is Roger's wife.
Hector is in the 32% tax bracket. He acquired 10,000 shares of stock in Eclipse Corporation three years ago at a cost of $100 per share. In the current year, Hector received a payment of $225,000 from Edlipse Corporation in exchange for 2,000 of his shares in Eclipse. Eclipse has E & P of $975,000. Hector has a capital loss carryover of $50,000 in the current tax year. Assume that Hector has no other capital gain transactions during the year. Taxpayers in the 32% tax bracket are subject to the long-term capital gains and qualified dividends tax rate of 15%. What amount of the capital loss may Hector deduct in the current year in the following situations? If an amount is zero, enter "0". a. The $225,000 payment from Eclipse Corporation is a qualifying stock redemption for tax purposes. Hector may use $ 25,000 of the capital loss carryover to offset the gain on the redemption. His income tax liability is 8,000 b. The $225,000 payment from Eclipse Corporation does not qualify as a stock…
After several years of profitable operations, Javell, the sole shareholder of JBD Inc., a C corporation, sold 22 percent of her JBD stock to ZNO Inc., a C corporation in a similar industry. During the current year, JBD reports $1,200,000 of after-tax income. JBD distributes all of its after-tax earnings to its two shareholders in proportion to their shareholdings. How much tax will ZNO pay on the dividend it receives from JBD? What is ZNO's tax rate on the dividend income (after considering the DRD)? [Hint. See IRC $243.] (Round the "Tax rate on dividend income" to 2 decimal places.) ZNO's tax on dividend received ZNO's tax rate on dividend income % www.oboocess
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Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $305,000 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.) Adjusted Tax FMV Basis $ 114,375 266,875 $ 381,250 $ 30,500 122,000 $ 152,500 Building Land Total To equalize the exchange, Wizard Corporation paid Hermione $76,250 in addition to her stock. Assume Hermione's adjusted tax basis in the land was $381,250. i. What adjusted tax basis does Wizard Corporation take in the land and building received from Hermione? Land Building Adjusted tax basis
Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $305,000 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.) Adjusted Tax FMV Basis Building $ 114,375 266,875 $ 381,250 $30,500 Land 122,000 $ 152,500 Total To equalize the exchange, Wizard Corporation paid Hermione $76,250 in addition to her stock. Assume Hermione's adjusted tax basis in the land was $305,000. g. What adjusted tax basis does Wizard Corporation take in the land and building received from Hermione? Land Building Adjusted tax basis $ 53,375
18. Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $200,000 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.) FMV Adjusted Tax Basis Building $ 75,000 $ 20,000 Land 175,000 80,000 Total $ 250,000 $ 100,000 To equalize the exchange, Wizard Corporation paid Hermione $50,000 in addition to her stock. What is Hermione’s tax basis in the stock she receives in return for her contribution of property to the corporation?
19. Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $200,000 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.) FMV Adjusted Tax Basis Building $ 75,000 $ 20,000 Land 175,000 80,000 Total $ 250,000 $ 100,000 To equalize the exchange, Wizard Corporation paid Hermione $50,000 in addition to her stock. What adjusted tax basis does Wizard Corporation take in the land and building received from Hermione? Adjusted tax basis land and building?
Vala
Lily is the sole shareholder of Crimson Corporation (a C corporation). At a time when Crimson has a deficit in accumulated E & P of $90,000 and current E & P of $65,000, it distributes a cash dividend of $85,000. If Lily’s basis in her stock is $15,000, what are the tax consequences of the distribution to: a. Lily? b. Crimson Corporation?