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Signature assignment

Part 1

Jayhawk Company reports current E&P of $377,500 and accumulated E&P of negative $275,000. Jayhawk distributed $452,500 to its sole shareholder, Christine Rock, on the last day of the year. Christine’s tax basis in her Jayhawk stock is $71,750. (Leave no answer blank. Enter zero if applicable. Negative amounts should be indicated by a minus sign.)

 

  1. How much of the $452,500 distribution is treated as a dividend to Christine?
    Dividend: ___________________

 

  1. What is Christine’s tax basis in her Jayhawk stock after the distribution?

    Tax Basis: _________________

 

  1. What is Jayhawk’s balance in accumulated E&P on the first day of next year?

Balance in accumulated E & P: ___________________

 

This year, Sooner Company reports current E&P of negative $430,000. Its accumulated E&P at the beginning of the year was $356,000. Sooner distributed $712,000 to its sole shareholder, Boomer Wells, on June 30 of this year. Boomer’s tax basis in his Sooner stock is $119,500. (Leave no answer blank. Enter zero if applicable. Negative amounts should be indicated by a minus sign.)

 

  1. How much of the $712,000 distribution is treated as a dividend to Boomer?
    Dividend: _______________________

 

  1. What is Boomer’s tax basis in his Sooner stock after the distribution?

Tax Basis: ________________________

 

  1. C. What is Boomer’s tax basis in his Sooner stock after the distribution?

Balance in accumulated E & P: ___________________

 

 

 

Part 2:

 

[The following information applies to the questions displayed below.]

Ramon incorporated his sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation’s stock. The property transferred to the corporation had the following fair market values and adjusted bases:

 

 FMV Adjusted Basis
Inventory$31,250 $7,900
Building 64,000  38,750
Land 159,000  75,000
Total$254,250 $121,650
 

 

The fair market value of the corporation’s stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Ramon. (Negative amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)
 

  1. What amount of gain or loss does Ramon realize on the transfer of the property to his corporation?

Gain or Loss Realized: _______________

 

  1. What amount of gain or loss does Ramon recognize on the transfer of the property to his corporation?

 

Gain or loss recognized: ______________

 

  1. What is Ramon’s basis in the stock he receives in his corporation?

 

Tax basis: ____________________

 

 

 

[The following information applies to the questions displayed below.]

Carla incorporated her sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation’s stock. The property transferred to the corporation had the following fair market values and adjusted bases:

 

 FMV Adjusted Basis
Inventory$32,500 $13,000
Building 202,000  104,250
Land 252,750  317,000
Total$487,250 $434,250
 

 

The corporation also assumed a mortgage of $157,500 attached to the building and land. The fair market value of the corporation’s stock received in the exchange was $329,750. (Negative amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)

 

 

 

  1. What amount of gain or loss does Carla realize on the transfer of the property to the corporation?

 

??
??
Amount realized?
??
??

 

 

Options for the left column

  • Adjusted basis of the property transferred
  • Cost of stock received
  • Fair market value of stock received
  • Loss Suffered
  • Mortgage assumed by corporation
  • Mortgage assumed by sole proprietorship

 

  1. What amount of gain or loss does Carla recognize on the transfer of the property to the corporation?

Gain or loss recognized: _____________________

 

  1. What is Carla’s basis in the stock she receives in her corporation?

Tax Basis: ______________________

 

 

[The following information applies to the questions displayed below.]

Robert and Sylvia propose to have their corporation, Wolverine Universal (WU), acquire another corporation, EMU Inc., in a stock-for-stock Type B acquisition. The sole shareholder of EMU, Edie Eagle, will receive $600,000 of WU voting stock in the transaction. Edie’s tax basis in her EMU stock is $195,000. (Negative amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)

 

  1. What amount of gain or loss does Edie recognize if the transaction is structured as a stock-for-stock Type B acquisition?

 

Gain or loss recognized: _________________

 

  1. What is Edie’s tax basis in the WU stock she receives in the exchange?

Tax basis: ____________________

 

  1. What is the tax basis of the EMU stock held by WU after the exchange?

    Tax Basis: __________________________

 

[The following information applies to the questions displayed below.]

Shauna and Danielle decided to liquidate their jointly owned corporation, Woodward Fashions Inc. (WFI). After liquidating its remaining inventory and paying off its remaining liabilities, WFI had the following tax accounting balance sheet:

 FMV Adjusted Basis Appreciation
Cash$200,000 $200,000   
Building 50,000  10,000  40,000
Land 150,000  90,000  60,000
Total$400,000 $300,000 $100,000
 

Under the terms of the agreement, Shauna will receive the $200,000 cash in exchange for her 50 percent interest in WFI. Shauna’s tax basis in her WFI stock is $50,000. Danielle will receive the building and land in exchange for her 50 percent interest in WFI. Danielle’s tax basis in her WFI stock is $100,000. Assume for purposes of this problem that the cash available to distribute to the shareholders has been reduced by any tax paid by the corporation on gain recognized as a result of the liquidation. (Leave no answer blank. Enter zero if applicable. Negative amounts should be indicated by a minus sign.)

 

  1. What amount of gain or loss does WFI recognize in the complete liquidation?

Gain or loss recognized: ______________

 

  1. What amount of gain or loss does Shauna recognize in the complete liquidation?

Gain or loss recognized: __________

 

 

  1. What amount of gain or loss does Danielle recognize in the complete liquidation?

Gain or loss recognized: _______________

 

 

  1. What is Danielle’s tax basis in the building and land after the complete liquidation?
 BuildingLand
Adjusted Basis  

 

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