Principles Of Taxation For Business And Investment Planning 2020 Edition
23rd Edition
ISBN: 9781259969546
Author: Sally Jones, Shelley C. Rhoades-Catanach, Sandra R Callaghan
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 16, Problem 9QPD
a.
To determine
Discuss the valuation issue suggested if Mr and Mrs R give the combined 60 percent stock interest to her son.
b.
To determine
Discuss the valuation issue suggested if an unrelated investor gives the 10 percent stock interest to the son.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Kathleen owns 500 shares of Buda Corporation common stock which was purchased on March 20, 2000, for $48,000. On October 10 of the current year, she receives a distribution of 500 stock rights. Each stock right has a $20 FMV and the FMV of the Buda common stock is $100 per share. With each stock right, she may acquire one share of Buda common stock for $95.
a. How much gross income must Kathleen recognize?
b. What is the basis of each stock right received?
c. If she sells the 500 stock rights for $10,600, what is her gain?
d.If she exercises the 500 stock rights on November 10, what is the basis of the 500 shares she receives and when does the holding period for those shares start?
Hayden owns 100% of the shares of ABC Co. Hayden's spouse owns 100% of the shares of XYZ Co. The shares of ABC Co. are valued at $50,000 with an ACB and PUC of $1000.
The couple planning for XYZ Co. to pay Hayden $50,000 in cash for the shares in ABC Co. Which of the following will result from this sale?
Multiple Choice
Hayden will recognize a capital gain of $49,000.
Hayden will recognize a deemed dividend of $50,000 and a capital gain of $0.
Hayden will recognize a deemed dividend of $49,000 and a capital gain of $0.
Hayden will recognize a capital gain of $50,000.
Marilyn owns 100% of the stock of Lilac, Inc., with an adjusted basis of $45,000. She receives a cash distribution of $160,000 from Lilac when its earnings and profits are $90,000.
A. What is Marilyn’s dividend income?
B. What is Marilyn’s recognized gain or loss?
c. What is Marilyn’s adjusted basis for her stock after the distribution?
Chapter 16 Solutions
Principles Of Taxation For Business And Investment Planning 2020 Edition
Ch. 16 - Contrast the income tax consequences of the yields...Ch. 16 - Prob. 2QPDCh. 16 - Mrs. Buckley, age 74, has 100,000 in a certificate...Ch. 16 - Ms. Quint sadly concluded that a 7,500 debt owed...Ch. 16 - Prob. 5QPDCh. 16 - Prob. 6QPDCh. 16 - Discuss the potential effect of the passive...Ch. 16 - Prob. 8QPDCh. 16 - Prob. 9QPDCh. 16 - Prob. 10QPD
Ch. 16 - Prob. 11QPDCh. 16 - Prob. 1APCh. 16 - Mr. and Mrs. Lays taxable income is 679,000, which...Ch. 16 - Dianne Stacy, a single taxpayer, has 272,000...Ch. 16 - Prob. 4APCh. 16 - Mrs. Nunn, who has a 24 percent marginal tax rate...Ch. 16 - Refer to the preceding problem and assume that...Ch. 16 - Mrs. Yue, a resident of Virginia, paid 50,000 for...Ch. 16 - Ms. Pay, who has a 40.8 percent marginal tax rate...Ch. 16 - Mr. Jolly received the 100,000 face amount on the...Ch. 16 - Prob. 10APCh. 16 - Prob. 11APCh. 16 - Prob. 12APCh. 16 - Prob. 13APCh. 16 - Fifteen years ago, Mr. Fairhold paid 50,000 for a...Ch. 16 - Refer to the facts in the preceding problem....Ch. 16 - Prob. 16APCh. 16 - Prob. 17APCh. 16 - Three years ago, Mrs. Gattis loaned 10,000 to Mr....Ch. 16 - Prob. 19APCh. 16 - Prob. 20APCh. 16 - Mrs. Beard recognized a 12,290 capital loss on the...Ch. 16 - Prob. 22APCh. 16 - Prob. 23APCh. 16 - Mr. and Mrs. Revel had 206,200 AGI before...Ch. 16 - Prob. 25APCh. 16 - Mr. Fox, a single taxpayer, recognized a 64,000...Ch. 16 - Mrs. Cox, a head of household, earned a 313,000...Ch. 16 - Prob. 28APCh. 16 - Prob. 29APCh. 16 - Mr. Dunn, who has a 32 percent marginal rate on...Ch. 16 - Prob. 31APCh. 16 - Prob. 32APCh. 16 - Prob. 33APCh. 16 - Prob. 34APCh. 16 - Prob. 35APCh. 16 - Prob. 36APCh. 16 - Ms. Turney owns a one-half interest in an...Ch. 16 - Prob. 38APCh. 16 - Prob. 39APCh. 16 - Prob. 40APCh. 16 - Mr. Erwins marginal tax rate on ordinary income is...Ch. 16 - Prob. 42APCh. 16 - Prob. 43APCh. 16 - Prob. 44APCh. 16 - Prob. 45APCh. 16 - Mrs. Wolter, an unmarried individual, owns...Ch. 16 - Prob. 1IRPCh. 16 - Prob. 2IRPCh. 16 - Prob. 3IRPCh. 16 - Prob. 4IRPCh. 16 - Prob. 5IRPCh. 16 - Two years ago, Ms. Eager loaned 3,500 to her...Ch. 16 - Prob. 7IRPCh. 16 - This year, Ms. Tan had a 29,000 capital loss...Ch. 16 - Prob. 9IRPCh. 16 - Mr. Pugh has a 7,900 adjusted basis in his limited...Ch. 16 - Prob. 11IRPCh. 16 - Mr. Durst died on March 8. His taxable estate...Ch. 16 - Prob. 13IRPCh. 16 - Prob. 1RPCh. 16 - Prob. 2RPCh. 16 - Prob. 1TPCCh. 16 - Ms. Kaspari, who has a 24 percent marginal rate on...Ch. 16 - Prob. 3TPCCh. 16 - Prob. 4TPC
Knowledge Booster
Similar questions
- Frank has 200 shares of XYZ, Inc. with a basis of $5,000 and a value of 7,500. He receives a tax-free stock dividend of 50 additional shares, worth $2,500. (a) After the stock dividend, what is his per share basis in the stock? In other words, if he sells 1 share of stock, what is the basis in that share for determining the gain on the sale of the share? (b) Suppose it was a tax-free dividend, but the 50 new shares were of preferred stock – what would his basis be in common stock and in the preferred stock?arrow_forwardGeorge and Nancy form EB Corporation. George transfers land (basis of $100 and fair market value of S110) for 10 shares plus $10 cash. Nancy transfers $5 cash for 2 shares in EB Corporation, what gains do george and Nancy recognize, what is the stock basisarrow_forwardAl owns 800 shares of The Good Life Co. The company recently issued a statement that it will pay a dividend per share of $0.55 this year and a $0.60 per share liquidating dividend next year. Al wants equal dividend income in both years. Al earns 9 percent on his investments. Ignoring taxes, what will Al's total homemade dividend policy and what will be his dividend income in both years? Support your answer with detailed computations.arrow_forward
- Patricia owns 100 shares of Nash, Inc. common stock which she purchased for $1600. On May 29 of the current year, Nash issued a 10% proportionate common stock dividend and Patricia received an additional 10 shares, each of which has a value of $20. How much income does Patricia report for this dividend? O $2000 O $1600 O $0 O $200arrow_forwardJane Ramos owned stock with a cost of $200,000. The stock has a market value on Jane's date of death of $375,000. The stock was willed to Jane's niece Jenny. Which of the following is true? a. Jenny's basis is $200,000; the stock's value in the gross estate is $100,000. b. Jenny's basis is $375,000; the stock's value in the gross estate is $100,000. c. Jenny's basis is $200,000; the stock's value in the gross estate is $375,000. d. Jenny's basis is $375,000; the stock's value in the gross estate is $375,000.arrow_forwardAt a point when Robin Corporation has been in existence for six years, shareholder Ted transfers real estate (with an adjusted basis of $20,000 and fair market value of $100,000) to the corporation for additional stock. At the same time, Peggy, the other shareholder, acquires one share of stock for cash. After the two transfers, the percentages of stock ownership are as follows: 79% is owned by Ted and 21% by Peggy. a. What were the parties trying to accomplish? Ted is attempting to meet the control? requirement of § 351. In order to qualify as a taxable? exchange under § 351, Peggy must join Ted in the transaction. If the requirements are not met, $____ on the transfer will be recognized as a gain? to Ted. b. Complete the following statement regarding whether this plan will work.The Regulations provide that stock issued for property whose value is relatively small? compared to the fair market value of the assets? will not be treated as issued in return for…arrow_forward
- For the last five years, Ava and Flipo each have owned 30 of the 60 outstanding shares of Zombie Corporation stock. Ava transfers land having a $4,500 basis and a(n) $10,500 fair market value (FMV) to Zombie for an additional 15 shares of Zombie stock. Flipo transfers $700 cash to Zombie for one additional share of Zombie stock. Read the requirement. What amount of the gain or loss must Ava recognize on the exchange? (Enter a 0 if no gain is realized and/or recognized. Use a minus sign or parentheses for a loss.) Realized gain (loss) = Recognized gain (loss) = If the transaction does not meet the Sec. 351 requirements, suggest ways in which it can be structured so as to meet these requirements. O A. Ava must receive more than a nominal amount of stock in exchange for her property. If Ava obtained additional stock worth at least 80% of the value of the stock she already owned (i.e., at least 24 shares of stock in exchange for $16,800), her stock likely would be counted for control…arrow_forwardBonnie and Clyde are the only two shareholders in Getaway Corporation. Bonnie owns 60 shares with a basis of $8,800, and Clyde owns the remaining 40 shares with a basis of $17,500. At year-end, Getaway is considering different alternatives for redeeming some shares of stock. Evaluate whether each of the following stock redemption transactions will qualify for sale and exchange treatment. Getaway redeems 24 of Bonnie’s shares for $6,000. Getaway has $20,000 of E&P at year-end and Bonnie is unrelated to Clyde. Getaway redeems 24 of Bonnie’s shares for $6,000. Getaway has $20,000 of E&P at year-end and Bonnie is unrelated to Clyde. (Do not round intermediate calculations. Round your answers to the nearest whole number.) Bonnie owns 60% before the redemption, 47selected answer correct % after the redemption. Does this qualify as a sale or exchange? Yesselected answer correct If so, how much is the gain? $1,864selected answer incorrect…arrow_forwardAt a point when Robin Corporation has been in existence for six years, share- holder Ted transfers real estate (adjusted basis of $20,000 and fair market value of $100,000) to the corporation for additional stock. At the same time, Peggy, the other shareholder, acquires one share of stock for cash. After the two transfers, the percentages of stock ownership are as follows: 79% by Ted and 21% by Peggy. What were the parties trying to accomplish? Will it work? Explain.arrow_forward
- Ann and Paul are shareholders of Android Corporation. Each has a stock basis of $10,000. Android has $21,000 of current E&P and $6,000 of accumulated E&P. Android distributes $12,000 to Anne on July 31 and to Paul $24,000 On December 1. What is Ann’s dividend income (if any)? What is Ann’s capital gain? (if any)? What is Paul’s dividend income (if any)? What is Paul’s capital gain (if any)?arrow_forwardWilliam owns 200 shares of Data General stock. He purchased the stock for $20 a share. He sold her stock for $25 a share. The commissions required to buy and sell his stock totaled $130. Assuming that He received no dividends during the time she owned the stock, what is his total return for this transaction?arrow_forwardplease provide explanation: Ron owns 1,000 shares of Juno Corporation common stock which he purchased in 20X6 for $12.000. On 5-30-20X9 he purchases an additional 300 shares for $2,000. On 6-20-20X9 he sells the original 1,000shares for $8,000. On 7-15-20X9 he purchases 450 shares of Juno stock for $5.000. What is Ron's recognized gain or loss as a result of the sale of the stock and what is the basis for the shares purchased on 7-15-20X9, respectively?a. $1,000 loss; $6,200 basisb. $3,000 loss; $6,800 basisc. $4,000 loss; $5,000 basisd. $1,000 loss; $6,800 basise. None of the answers provided is correct.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you