Concepts in Federal Taxation 2019 (with Intuit ProConnect Tax Online 2017 and RIA Checkpoint 1 term (6 months) Printed Access Card)
26th Edition
ISBN: 9781337702621
Author: Kevin E. Murphy, Mark Higgins
Publisher: Cengage Learning
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Chapter 13, Problem 73TA
To determine
Prepare a memorandum discussing the effect of this prearranged agreement.
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We have the following facts:
The three below meet on January 2, 2021 and decide the following will happen as one transaction (even though not all
on the same day)
Emily exchanges land for 100 shares of ABC Inc on January 7, 2021. She has a basis of $10,000 and FMV of $100,000
David transfers cash for 10 shares on January 13, 2021. His basis and FMV are both $10,000
On February 10, 2021, Ethan agrees to exchange services during the next year for 100 shares of stock. They all agree
that the services will be worth $100,000
QUESTION: Does this qualify as a $351 transaction?
O a. No, Ethan's services taint the whole thing
O b. Yes at Emily but no to David (he was after Emily and so no control) and no to Ethan for services
O c. Yes, the three met at one time and all agreed to create the entity. So part of a prearranged plan
O d. Yes as to Emily as she had control immediately after her transaction
e. Yes as to Emily and David as they transferred property
Bruce and Rachel agree to form a partnership on July 1. Bruce, who has been trading as a sole proprietor, will invest certain business assets at agreed valuations, transfer his business liabilities and contribute sufficient cash to bring his total contribution to a 60% interest over the new business. Details of Bruce's assets and liabilities are given below (please see the attached image)
Rachel agrees to bring in inventory with a value of P146,500 and P93,500 in cash for a 40% interest in the partnership.
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The partners have agreed on the following:
a) capital accounts will remain fixed;
b) 12% interest profit computed on capital;
c) salaries of P30,000 each for 2019 but will be twice this amount next year and thereafter;
d)10% interest charge on partners' drawings made beyond the agreed salaries; and
e)remaining profits are to be shared equally.
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Directions:
a. Prepare two journal entries to set up the partnershipÂ
b. Prepare a statement of financial position for the partnership as…
MarĂa and Bob form Robin Corporation. MarĂa transfers property worth $130,000 (basis of $45,500) for 70
shares in Robin Corporation. Bob receives 30 shares for property worth $52,000 (basis of $10,400) and for
legal services (worth $5,200) in organizing the corporation.
If there is no gain or loss, enter "O" for the amount.
a. What gain or income, if any, will the parties recognize on the transfer
MarĂa recognizes no capital gain or loss of $............. Bob. recognizes ordinary income of $...?
b. What basis do MarĂa and Bob have in the Robin Corporation stock?
MarĂa has a basis of $....., and Bob has a basis of $..............the stock.
c. What is Robin Corporation's basis in the property and services it received from MarĂa and Bob?
Robin Corporation has a basis of $............ the property MarĂa transferred and a basis of $........ in the
property Bob transferred.
Chapter 13 Solutions
Concepts in Federal Taxation 2019 (with Intuit ProConnect Tax Online 2017 and RIA Checkpoint 1 term (6 months) Printed Access Card)
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