THE-WFT08-06-1001-ch_12_V4-SM

THE-WFT08-06-1001-ch_12_V4-SM - CHAPTER 12 S CORPORATIONS...

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Unformatted text preview: CHAPTER 12 S CORPORATIONS SOLUTIONS TO PROBLEM MATERIALS Status: Q/P in Question/ Present Prior Problem Topic Edition Edition 1 Tax differences: partnerships versus Unchanged 1 S corporation 2 Issue recognition Unchanged 2 3 Ethics problem Unchanged 3 4 Shareholder limit Unchanged 4 5 Valid shareholders Modified 5 6 Passive investment income Unchanged 6 7 Issue recognition Unchanged 7 8 Nonseparately computed income Unchanged 8 9 Subchapter S taxable income Unchanged 9 10 Distributions Unchanged 10 11 AAA New 12 Distribution of asset Unchanged 12 13 Distributions Unchanged 13 14 Stock basis/AAA Unchanged 14 15 Debt basis New 16 Loss allocation Modified 16 17 Loss allocation Unchanged 17 18 Property distributions Unchanged 18 19 Property distributions Unchanged 19 20 Stock basis/AAA/S income Modified 20 21 NOL and suspended loss Unchanged 21 22 NOL and suspended loss Modified 22 23 Built-in gains tax Unchanged 23 24 Postelection termination period Modified 24 25 Per-books election for short year Unchanged 25 26 Loan basis Unchanged 26 27 Loan basis Unchanged 27 28 Loan basis Unchanged 28 29 Built-in losses Unchanged 29 30 Built-in gains tax Modified 30 31 Passive income tax Unchanged 31 12-1 12-2 2008 Entities Volume/Solutions Manual Status: Q/P in Question/ Present Prior Problem Topic Edition Edition 32 Liquidation of S corporation Unchanged 32 33 Section 1244 stock Unchanged 33 34 Reducing salary to owner Unchanged 34 35 C corporation NOL and S election Unchanged 35 36 Passive losses Unchanged 36 Comprehensive Tax Return Problem 37 Computing taxable income, Schedule K-1 New items, adjustments Bridge Discipline Problem 1 State requirements for S corporations Unchanged 1 Research Problem 1 The S election Unchanged 1 2 Bad debt vs. stock redemption Unchanged 2 3 Passive losses Unchanged 3 4 Guaranteed loans Unchanged 4 5 Internet activity Unchanged 5 6 Internet activity Unchanged 6 7 Internet activity Unchanged 7 S Corporations 12-3 PROBLEMS 1. Although the Federal tax treatment of S corporations and partnerships is similar, it is not identical. For instance, liabilities affect an owner’s basis differently, and S corporations may incur a tax liability at the corporate level. Furthermore, an S corporation may not allocate income like a partnership, and distributions of appreciated property are taxable in an S corporation situation (see Concept Summary 12-2). In addition, a variety of C corporation provisions apply to S corporations. For example, the liquidation of C and S corporations is taxed in the same way. As a rule, where the S corporation provisions are silent, C corporation rules apply. p. 12-2 2. The two shareholders will have difficulty making the S election effective for the current year....
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THE-WFT08-06-1001-ch_12_V4-SM - CHAPTER 12 S CORPORATIONS...

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