Exam 20: Corporations and Partnerships

Darlene, a 30% shareholder in a calendar year S corporation, sells her stock on June 6, 2017. If the corporation has an operating loss for 2017, none of this loss can be claimed by Darlene because she was not a shareholder as of December 31, 2017.

Regarding the tax treatment of charitable contributions, corporations enjoy two major advantages over individuals. Elaborate.

In comparing regular C corporations with individuals, which of the following, if any, relate only to C corporations?

What causes a partner's basis in a partnership interest to fluctuate?

Although some differences exist, the tax treatment of S corporations and partnerships are very similar. In this connection, comment on the following. a.Tax at the entity level. b.Conduit approach. c.Treatment by owners (i.e., shareholders, partners) of excess entity losses.

Using the legend provided, classify each statement accordingly. a.Applies only to the income taxation of C corporations. b.Applies only to the income taxation of S corporations. c.Applies to both the income taxation of C corporations and S corporations. d.Applies to neither the income taxation of C corporations nor of S corporations. -A shareholder cannot have a negative basis in his or her stock investment.

Jim, Betty, and Bill form Crow Corporation. Jim and Betty each contribute cash of $500,000, while Bill contributes land (basis of $550,000; fair market value of $600,000). Each shareholder receives one-third of Crow's stock, and Bill also receives $100,000 in cash. Which, if any, of the following choices is a correct result of the incorporation?

Prior to the end of its tax year, the shareholders of an S corporation either make additional capital contributions or advance funds in the form of loans. Could this shareholder activity be motivated by income tax considerations? Explain.

Using the legend provided, classify each statement accordingly. a.Applies only to the income taxation of individuals b.Applies only to the income taxation of C corporations c.Applies to both the income taxation of individuals and of C corporations d.Applies to neither the income taxation of individuals nor of C corporations -Excess charitable contributions can be carried over for five years.

Jacob and Ashley form Junco Corporation with the following investments: ​ Jacob and Ashley each receive one-half of the Junco stock. In addition, Ashley receives cash of $100,000. One of the results of these transfers is:

Guaranteed payments have no effect on the basis of a partner's interest in the partnership.

Camilla and Dean form Grouse Corporation with the following investment: ​ Camilla and Dean each receive 300 shares of stock in Grouse Corporation and, in addition, Dean receives $30,000 in cash. As a result of the transfer, Dean's basis in the stock and Grouse's basis in the property will be:

In determining the NOL of a C corporation, fewer adjustments are necessary than in the case of individual taxpayers. Why is this the case?

The foreign tax credit is available only to individuals and not to C corporations.

Property distributions to shareholders can result in the distributing corporation recognizing gains and losses.

A distribution to a shareholder could result in dividend income even if the corporation had a deficit in current E & P.

Using the legend provided, classify each statement accordingly. a.Applies only to the income taxation of individuals b.Applies only to the income taxation of C corporations c.Applies to both the income taxation of individuals and of C corporations d.Applies to neither the income taxation of individuals nor of C corporations -A domestic production activities deduction is available.

If property contributed to a partnership is subject to a liability (assumed by the partnership), gain is recognized to the contributing partner to the extent of the liability.

Jack is a 40% partner in the Gull Partnership, a calendar year taxpayer. As of January 1, 2017, Jack's basis in his partnership interest is $100,000. Gull's operating results are: $400,000 loss for 2017 and $300,000 profit for 2018. a.What is Jack's basis for his partnership interest as of January 1, 2018? b.What is Jack's basis for his partnership interest as of January 1, 2019?

For corporations and individuals, net short-term capital gains are taxed at ordinary income rates.