Income Tax Fundamentals 2020
38th Edition
ISBN: 9780357391129
Author: WHITTENBURG
Publisher: Cengage
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 9MCQ
To determine
Introduction:
Taxable income refers to the income derived after specific deductions. In order to avoid abuse of tax when related parties engage in transactions, the tax law states provisions for them.
To choose: The correct option.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
William, Xavier and Zelda formed WXZ Partnership. William contributed land with a fair market
value of $50,000 (basis of $10,000) in exchange for a 50% interest (capital and profits/losses).
Zelda contributed services worth $30,000 in exchange for a 40% profit interest (profit interest
only; no capital interest). Xavier owns the remaining interest in the partnership.
What is the amount of William's recognized gain on the contribution of land in exchange for his
interest in the partnership?
None
Mickey, Don, and Derek are equal (1/3rd) partners in River Avenue, LLC. Mickey’s outside basis in his partnership interest is $250. River Avenue’s balance sheet (include FMV) is below. What are the tax consequences to Mickey if he sells his interest to Roger for $500 cash + debt assumption? How much of the gain/loss is ordinary and how much is capital? *Assume that River Avenue originally purchased the machinery for $120 (i.e., accumulated depreciation = $65), and that $120 of depreciation has been taken on the building since its acquisition five years ago*
Assets
FMV
Book
Tax
Debt
Book
Tax
Cash
240
240
240
Recourse
150
150
A/R
60
75
75
Inventory
150
90
90
Capital
Machinery
100
55
55
Mickey
200
200
Building
500
200
200
Don
200
200
Stock
300
90
90
Derek
200
200
Goodwill
300
0
0
Chapter 6 Solutions
Income Tax Fundamentals 2020
Ch. 6 - E Corporation is a subchapter S corporation owned...Ch. 6 - Income and loss from which of the following...Ch. 6 - Which of the following entities is likely to have...Ch. 6 - Which of the following is an acceptable method of...Ch. 6 - Which of the following entities is required to...Ch. 6 - Prob. 6MCQCh. 6 - B Corporation, a calendar year-end, accrual basis...Ch. 6 - Prob. 8MCQCh. 6 - Prob. 9MCQCh. 6 - Prob. 10MCQ
Ch. 6 - Prob. 11MCQCh. 6 - Prob. 12MCQCh. 6 - For 2019, Roberta is a self-employed truck driver...Ch. 6 - Prob. 14MCQCh. 6 - Prob. 15MCQCh. 6 - Which of the following employees would not be...Ch. 6 - Prob. 17MCQCh. 6 - Prob. 18MCQCh. 6 - Prob. 19MCQCh. 6 - Christine and Doug are married. In 2019, Christine...Ch. 6 - Prob. 1PCh. 6 - Prob. 2PCh. 6 - Geraldine is an accrual basis taxpayer who has the...Ch. 6 - Prob. 4PCh. 6 - Prob. 5PCh. 6 - Prob. 7PCh. 6 - Prob. 8PCh. 6 - Refer to the previous problem 8. If Stan's parents...Ch. 6 - Prob. 10PCh. 6 - Prob. 11PCh. 6 - Otto and Monica are married taxpayers who file a...Ch. 6 - Prob. 13PCh. 6 - Prob. 14PCh. 6 - Prob. 15PCh. 6 - Prob. 16PCh. 6 - Sally hires a maid to work in her home for $280...Ch. 6 - Prob. 18PCh. 6 - Rachel is single and has wages of $150,000 and...Ch. 6 - Married taxpayers Otto and Ruth are both...
Knowledge Booster
Similar questions
- Amy, Andy, and Anya own 10%, 25%, and 65%, respectively, in the FFF Partnership. Amy sells securities for their $45,000 FMV to the partnership. Review the following independent situations: a. Amy's basis in the securities is $65,000. The three partners are siblings. b. Amy's basis in the securities is $85,000. Amy is unrelated to the other partner: c. Amy's basis in the securities is $20,000. Amy and Anya are sisters. The partnership will hold the securities as an investment. d. What are the tax consequences in Part a if the partnership subsequently sells the securities to an unrelated third party for $73,000? For $56,000? For $39,000?arrow_forwardHi can you help me to answer this question?arrow_forwardAl (60%) & Bob (40%) are partners in ALBOB Partnership, and Al has an outside basis of $1,000,000 and a capital account balance of $1,000,000 prior to the distribution. ALBOB distributes inventory ($110,000 FMV, $10,000 inside basis) to Al in a disproportionate current distribution. 1. What is the amount of gain (ordinary income gain) recognized by Bob? 2. What is Al's basis in the inventory he received?arrow_forward
- Eddie and Elizabeth are equal partners in a partnership that owns (i) publicly traded stock held for investment with a tax basis of $500,000 and a value of $550,000 and (ii) other assets, which are capital assets, that have a tax basis of $1,000,000 and a value of $200,000. If Eddie, a dealer in publicly traded stock who bas an outside basis of $750,000, sells his interest in the partnership to Richard for $375,000, how much gain or loss is recognized? What is the character of the gain or loss?arrow_forward13a.Harry and Sally formed the Evergreen partnership by contributing the following assets in exchange for a 50 percent capital and profits interest in the partnership: Basis Fair Market Value Harry: Cash $ 30,000 $ 30,000 Land 100,000 120,000 Totals $ 130,000 $ 150,000 Sally: Equipment used in a business 200,000 150,000 Totals $ 200,000 $ 150,000 What is Evergreen’s tax basis in its assets?arrow_forwardWhich of the following statements about business entity income is TRUE? Blair is a shareholder in a C corporation. She owns 55% of the shares and performs services for the company. Her wages will be reported on Form W-2, and her share of the company's ordinary income will be reported to her on Schedule K-1 (Form 1120). Estrada is a limited partner who materially participates in the partnership and receives guaranteed payments. The partnership will report her guaranteed payments on Schedule K-1 (Form 1065). Estrada's guaranteed payments will be subject to self-employment tax. O Laura is a shareholder in an S corporation. She owns 15% of the shares and does not perform services for the company. The company will report her share of income on Schedule K-1 (Form 1120-S). Laura will pay self-employment tax on her share of the ordinary income. O Tanita is a sole proprietor. She may report her business income on Schedule C (Form 1040) or Form 1065. Mark for follow uparrow_forward
- Blake and Ryan form the Poole Partnership. Blake contributes cash of $15,000. Ryan contributes land with an adjusted basis of $10,000 and a fair market value of $21,000. The land is subject to a $6,000 mortgage that Poole assumes. Blake and Ryan both receive a 50 percent interest in Poole. What is Ryan's recognized gain or loss on the contribution? a.$11,000 loss b.$5,000 gain c.$16,000 gain d.$4,000 loss e.None of these choices are correct.arrow_forwardWilliam, Xavier and Zelda formed WXZ Partnership. William contributed land with a fair market value of $50,000 (basis of $10,000) in exchange for a 50% interest (capital and profits/losses). Zelda contributed services worth $30,000 in exchange for a 40% profit interest (profit interest only; no capital interest). Xavier owns the remaining interest in the partnership. What is WXZ’s inside basis in the land immediately after the contribution?arrow_forwardwhich of the following is not a "relative" under the constructive ownership rules? A. 60 percent owned corporation. B. A sister. C. A partnership in which the taxpayer owns 20 percent. D. A trust of which taxpayer is the sole beneficiary. E. All of the Above are considered Relatives.arrow_forward
- In the ABC partnership (to which Daniel seeks admittance), the capital balances of Albert, Bert, and Connell, who share income in the ratio of 5:3:2 are: Albert $500,000 Bert 300,000 Connell 200,000 Based on the preceding information, what amount of goodwill will be recorded if Daniel invests $300,000 for a 20% interest? 250,000 100,000 150,000 200,000arrow_forward. Randolph is a 30% partner in the RD Partnership. On January 1, RD distributes $7,500 cash and inventory with a basis of $15,000 to Randolph in complete liquidation of his interest. RD has no liabilities at the date of the distribution. Randolph's basis in RD is $27,000. a.What is Randolph’s basis in each of the assets distributed? b. What is the amount and character of Randolph's gain or loss on the distribution?arrow_forwardThis year, Darrel’s distributive share from Alcove Partnership includes $6,000 of interest income, $3,000 of dividend income, and $70,000 ordinary business income.a. Assume that Darrel materially participates in the partnership. How much of his distributive share from Alcove Partnership is potentially subject to the net investment income tax?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
