Exam 2: Corporate Formations and Capital Structure

Chris transfers land with a basis of $40,000 to Webb Corporation in exchange for 100% of Webb's stock.At the date of the transfer,the land had a $30,000 fair market value.Chris makes an election to reduce his basis in Webb's stock to $30,000,so Webb's basis in the land is

The transferor's basis for any noncash boot property received in a Sec.351 transaction is the boot's FMV reduced by any unrecognized gain.

Lynn transfers land having a $50,000 adjusted basis,an $80,000 FMV,and $10,000 cash to Allied Corporation in exchange for 100% of Allied's stock.The corporation assumes the $70,000 mortgage on the land.Which of the following statements is correct?

What are the tax consequences to Whitney who owns 50% of Museum Corporation,a qualifying S Corporation that is a calendar-year entity,if Museum Corporation reports $60,000 of taxable income? How would your answer change if Museum Corporation reported a $40,000 loss?

If an individual transfers an ongoing business to a corporation in a Sec.351 exchange,the individual must recognize any realized gain

Several years ago,John acquired 200 shares of Jersey Corporation stock directly from the corporation for $150,000 in cash.This year,he sold the stock to Bill for $85,000.What tax issues should John consider with respect to the stock sale?

Identify which of the following statements is true.

The City of Providence donates land worth $125,000 to Triple A Corporation to induce it to locate in Providence and provide jobs for its citizens.How much gross income must Triple A Corporation recognize because of the land contribution,and what is the land's basis to Triple A Corporation?

On April 2 of the current year,Jana transfers land with a basis of $140,000 and a fair market value of $120,000 to Amish Corporation in exchange for all of its stock.She had originally acquired the land on December 1,2002.What tax issues arise from the exchange?

On January of the current year,Rae purchases 100% of Sun Corporation stock for $30,000.Sun Corporation reports taxable income of $25,000 in the current year,on which it pays tax of $3,750.None of the remaining $21,250 is distributed to Rae.However,on January 1 of the next year,Rae sells her stock to Lee for $51,250.What are the tax consequences to Rae of the sale?

The City of Portland gives Data Corporation $60,000 cash and land worth $100,000 to induce it to move.The cash was not spent during the 12 months following contribution.The contribution results in

Identify which of the following statements is true.

There are no tax consequences of a partnership converting to a C corporation.

The tax disadvantages of the C corporation form of doing business include "double taxation." What is meant by the term "double taxation" as used in this context?

Martin operates a law practice as a sole proprietorship using the cash method of accounting.Martin incorporates the law practice and transfers the following items to a new,solely owned corporation. Martin must recognize a gain of ________ and has a stock basis of ________:

Three members form an LLC in the current year.Which of the following statements is incorrect?

Business assets of a sole proprietorship are owned by

Which of the following statements is correct?

Ra Corporation issues a twenty-year obligation at its $1,000 face amount.Rames purchases the obligation for $1,000 on the issue date.Due to a decline in interest rates,Ra calls the obligation by paying $1,010 to each of the holders of the twenty-year obligations.What is the tax treatment of the $1,010 by Ra and Rames?

If a corporation's total adjusted bases for all properties transferred exceed the total FMV of the properties,the corporation's bases in the property is limited to FMV if no election is made.