Exam 13: Comparative Forms of Doing Business

Normally a C corporation shareholder would prefer to receive a return of capital distribution (e.g., stock redemption) rather than a dividend distribution. Provide an example of where the opposite is true.

Match the following: -S corporation

The corporation has a greater potential for raising capital than does the partnership.

Match the following statements: -Sale of corporate stock by the S corporation shareholders.

The § 465 at-risk provision and the § 469 passive activity loss provision have decreased the tax attractiveness of investments in real estate for partnerships and for limited liability companies.

Match the following attributes with the different forms. A particular attribute may apply to more than one entity form -S corporation

Why does stock redemption treatment for an individual shareholder produce more favorable tax consequences than a dividend?

Match the following: -General partnership

What special adjustment is required in calculating the AMT of a C corporation that does not apply in calculating the AMT of an individual taxpayer?

All of the shareholders of an S corporation have limited liability with respect to their ownership interests in the corporation, whereas only limited partners in a limited partnership have such limited liability.

Match the following attributes with the different forms. A particular attribute may apply to more than one entity form -C corporation

Kristine owns all of the stock of a C corporation which owns the following assets: * Potential § 1245 recapture of $45,000. ** Straight-line depreciation was used. Her adjusted basis for her stock is $270,000. Calculate Kristine's recognized gain or loss and classify it as capital or ordinary if she sells her stock for $500,000.

Khalid contributes land (fair market value of $700,000; adjusted basis of $200,000) and Dan contributes $700,000 cash to form Teal Partnership. Khalid and Dan each own a 50% interest. One year later, Teal sells the land for $800,000. How much gain is recognized by each partner?

Match the following statements: -Alternative minimum tax

The special allocation opportunities that are available to partnerships are available to S corporations only if affected shareholders elect to do so.

Which of the following are "reasonable needs" that will help a corporation in avoiding the accumulated earnings tax?

An S corporation is not subject to the AMT, but its shareholders are in that the S corporation's AMT adjustments and preferences are passed through to them.

Melinda's basis for her partnership interest is $250,000. If she receives a cash distribution of $290,000, her recognized gain is $40,000 and her basis for her partnership interest is reduced to $0. Melinda is still a partner after the distribution.

Bart contributes $100,000 to the Fish Partnership for a 40% interest. During the first year of operations, Fish has a profit of $20,000. At the end of the first year, Fish has outstanding loans from the following banks. First Bank (recourse) $10,000 Second Bank (nonrecourse) 30,000 What is Bart's at-risk basis in Fish at the end of the first year?

The accumulated earnings tax rate in 2014 is greater than the highest tax rate for a C corporation.