Exam 2: Corporate Formations and Capital Structure

Will, a shareholder in Wiley Corporation, lent money to the corporation. The corporation is unable to repay him. What tax issues should Will consider with respect to the loan?

What is the tax treatment for a contribution of capital to a corporation by a nonshareholder who is not a customer, potential customer, government entity, or civic group?

Identify which of the following statements is true.

Which of the following is required in order for a transaction to be considered a corporate inversion?

A foreign corporation with a single class of stock is owned equally by Jericho Corporation, a U.S. corporation, and Joshua, a U.S. citizen. Joshua owns no Alpha Corporation stock. Is the foreign corporation a controlled foreign corporation (CFC)?

Explain the alternatives available to individual taxpayers for reporting foreign income taxes that have been paid or accrued.

Under the Subpart F rules, controlled foreign corporations (CFCs) are required to distribute a certain portion of their income as dividends to their U.S. shareholders.

Income is "effectively connected" with the conduct of a U.S. business only if

Identify which of the following statements is true.

In 2017, Phoenix Corporation is a controlled foreign corporation (CFC) incorporated in Country X. It is 100% owned by its U.S. parent corporation. Phoenix has $80,000 of taxable income from the sale of widgets that were purchased from their U.S. parent corporation. All widgets are intended for use or consumption within Country X and have the same gross profit. Sixty percent of the widgets were sold through a Country X wholesaler that is 100% owned by Phoenix, and 40% are sold through unrelated Country X wholesalers. What amount of profits will be constructively distributed as foreign- based company sales income to the U.S. parent company?

Ashley, a U.S. citizen, works in England for part of the year. She earns $40,000 in England, paying $10,000 in income taxes to the British government. Her U.S. income is $60,000 and she pays $12,000 in U.S. taxes. Her taxes on her worldwide income are $20,000. What is Ashley's foreign tax credit? Assume she does not qualify for the foreign- earned income exclusion.

Identify which of the following statements is true.

Sarah has advanced money to her corporation. What tax issues should she consider with respect to this money?

A nonresident alien cannot

Stu Walker has owned all 200 shares of Lance Corporation's stock for the past six years. This year, Megan Jones contributes property with a $100,000 basis and a $160,000 FMV for 160 newly issued Lance shares. At the same time, Stu contributes $30,000 in cash for 30 newly issued Lance shares. What tax issues should Megan and Stu consider with respect to the stock acquisitions?

Joan transfers land (a capital asset) having a $20,000 adjusted basis to Jet Corporation in a transaction qualifying Sec. 351. In exchange, she received 50 shares of Jet Corporation common stock valued at $50,000, a $15,000 Jet Corporation bond due in 10 years, and a $10,000 Jet Corporation note due in 3 years. What tax issues should Joan consider with respect to the transfer? a) What is the amount of Joan's realized gain or loss? What is the amount of Joan's recognized gain or loss? Wh character of Joan's recognized gain or loss? b) What is Joan's basis in her stock? What is Joan's basis in the bond? What is Joan's basis in the note? c) What is Jet Corporation's basis in the land?

Discuss the use of a "tax haven" nation to reduce taxes and the effect of Subpart F rules on such planning.

Identify which of the following statements is true.

Abby owns all 100 shares of Rent Corporation's stock, valued at $10,000. Bart owns property that has a $1,500 adjusted basis and a $10,000 FMV. Bart contributes the property to Rent Corporation in exchange for 100 shares of newly issued Rent stock. Abby transfers additional property worth $10,000 for an additional 10 shares of newly issued Rent stock too. Does Sec. 351 apply?

U.S. citizen Patrick is a bona fide resident of a foreign country for all of the current year. Patrick uses a calendar year as his tax year. He has $100,000 of self- employment income and incurs $20,000 in housing expenses. The base housing cost amount is $16,624. The deduction for housing expenses is