Question

In: Accounting

Individual A ("A"), Individual B ("B"), both calendar year taxpayers, and Corporation C ("C") with a...

Individual A ("A"), Individual B ("B"), both calendar year taxpayers, and Corporation C ("C") with a fiscal year end June 30, form Partnership P ("P") on January 1 of Year 1. P manufactured widgets and is not a passive activity.   A contributes $300,000 cash in exchange for a 30% ownership interest (profits and capital), B contributes property with a fair market value ("FMV") of $400,000 and adjusted basis of $110,000, but subject to a non-recourse mortgage of $100,000 (which is not qualified non-recourse financing) in exchange for a 30% ownership interest (profits and capital) and C contributed a property FMV $400,000 adjusted basis $500,000 in exchange for a 40% ownership interest.

From January 1, Year 1 through December 31, Year 1 (12 months) P lost $10,000 a month from operations. From January 1 Year 2 through December 31 Year 2 P earned $15,000 per month from operations at which point it shuttered operations and earned $0 thereafter.

a. What income, gain or loss, of any does B recognize upon formation of P?        

b. What income does B report on B's income tax return for

                        Year 1

                        Year 2

                        Year 3

c. What income does C report on C's income tax return for

                      Year 1

                      Year 2

                     Year 3

Solutions

Expert Solution

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

ndividual A ("A"), Individual B ("B"), both calendar year taxpayers, and Corporation C ("C") with a...
ndividual A ("A"), Individual B ("B"), both calendar year taxpayers, and Corporation C ("C") with a fiscal year end June 30, form Partnership P ("P") on January 1 of Year 1. P manufactured widgets and is not a passive activity.   A contributes $300,000 cash in exchange for a 30% ownership interest (profits and capital), B contributes property with a fair market value ("FMV") of $400,000 and adjusted basis of $110,000, but subject to a non-recourse mortgage of $100,000 (which is...
A and B, both calendar year noncorporate taxpayers, are equal partners in the AB partnership, which...
A and B, both calendar year noncorporate taxpayers, are equal partners in the AB partnership, which had the following income and expenses during its (business purpose) taxable year that ended on July 31 of the current year: Gross receipts from inventory sales $100,000 Cost of goods sold $30,000 Salaries paid to nonpartners $10,000 Depreciation $12,000 Advertising expenses $8,000 Interest expense paid on investment margin account maintained by AB (see § 163(d)) $6,000 Gain from the sale of machine held for...
2. Deb is the sole shareholder of Timeless Corporation, a calendar year C corporation. In the...
2. Deb is the sole shareholder of Timeless Corporation, a calendar year C corporation. In the current year, Trash earned taxable income of $250,000 and distributed $175,000 to Deb. Kyle is the sole shareholder of Swanky Corporation, an S corporation. In the current year, Swanky earned taxable income of $250,000 and distributed $175,000 to Kyle. Assume both Kyle and Deb are in the highest regular tax bracket (use 37%). Contrast the tax treatment of Timeless Corporation and Deb with the...
Catherine is the sole stockholder of Cat Co., a calendar-year C corporation. The corporation has a...
Catherine is the sole stockholder of Cat Co., a calendar-year C corporation. The corporation has a business need for a tract of land that Catherine owns personally. The plan is for the corporation to use the land for eighteen months from March 1, 2018 through August 31, 2019. The fair market value of the land is $500,000. Catherine’s basis in the land is $100,000. She has held the land as an investment for the last five years. Catherine is considering...
Wonka Incorporated, is a C corporation that operates and operates on a calendar year. The sole...
Wonka Incorporated, is a C corporation that operates and operates on a calendar year. The sole shareholder of the corporation is Willy Wonka. Wonka’s only business since its incorporation in 2015 has been land-surveying services. In Wonka’s state of incorporation, only a licensed surveyor can perform land surveying. Willy, Wonka’s only employee, is a licensed surveyor but he is not a licensed engineer. Upon audit of Wonka’s 2015 and 2016 tax returns, the IRS assessed tax deficiencies stemming from its...
Wonka Incorporated, is a C corporation that operates and operates on a calendar year. The sole...
Wonka Incorporated, is a C corporation that operates and operates on a calendar year. The sole shareholder of the corporation is Willy Wonka. Wonka’s only business since its incorporation in 2015 has been land-surveying services. In Wonka’s state of incorporation, only a licensed surveyor can perform land surveying. Willy, Wonka’s only employee, is a licensed surveyor but he is not a licensed engineer. Upon audit of Wonka’s 2015 and 2016 tax returns, the IRS assessed tax deficiencies stemming from its...
Carlson Corporation a calendar year c corporation owned a truck it used in its business operation...
Carlson Corporation a calendar year c corporation owned a truck it used in its business operation that was fully depreciated. The truck was involved in an accident. Immediately before the accident, the fair market value of the truck was $12,000. Immediately after the accident, the fair market value of the truck was $7,000. Carlson only carried liability insurance on the vehicle so it did not receive any insurance reimbursement for the damage to the truck. Under the circumstances, what amount...
C Corporation has an S corporation election in effect. During the 2017 calendar tax year, the...
C Corporation has an S corporation election in effect. During the 2017 calendar tax year, the corporation had ordinary taxable income of $200,000, and on January 15, 2017, the corporation paid dividends to shareholders in the amount of $120,000. How much taxable income, in total, must the shareholders of the corporation report on their 2017 tax returns? $120,000 dividend income is taxable income. Should total include $200k ordinary income?
Copier Choice Corporation (CCC) is a calendar year, accrual method, C corporation engaged in the business...
Copier Choice Corporation (CCC) is a calendar year, accrual method, C corporation engaged in the business of selling, leasing, and servicing copiers primarily to service businesses such as accounting and law firms. During the fourth quarter of 2017, CCC received the following two payments: -Service payment: CCC received a $375,000 fee for a 15-month service contract on 375 copiers sold be CCC in Oct of 2017 to a national law firm. Under the terms of the contract, CCC will provide...
On Jan 1, 2017, NSP Corporation, a calendar year, accrual basis C corporation was organized and...
On Jan 1, 2017, NSP Corporation, a calendar year, accrual basis C corporation was organized and began business operations. NSP provides network security protection services for businesses. During 2017, it had financial income (per books) before tax of $1,000,000. The following items were expensed in the arriving at NSP’s 2017 financial income (per books): -$20,000 of organization costs to organize the corporation; the federal tax amortization amounted to $6,000. -$20,000 increase to its allowance for doubtful accounts; actual bad debts...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT