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Chapter 04 Solutions

Chapter 04 Solutions - ProblemSolutions ChapterFour 25...

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Problem Solutions Chapter Four 25. Leasing some property to a controlled corporation may be a more attractive alternative than transferring ownership. Leasing provides the taxpayer with the opportunity of withdrawing money from the corporation without the payment being characterized as a dividend. If the property is donated to a family member in a lower tax bracket, the lease income can be shifted as well. If the depreciation and other deductions available in connection with the property are in excess of the lease income, the taxpayer would retain the property until the income exceeds the deductions. p. 4-26 27. a. $0. b. $190,000. c. $140,000. d. $0. e. $285,000. f. $125,000 (basis in the equipment) and $10,000 (basis in the patent). g. The answers would not change. There is no requirement that the transferors receive the same type of stock. Further, both common stock and most preferred stock qualify as ‘‘stock.” However, if Gail received “nonqualified preferred stock,” her realized gain would be recognized because this type of preferred stock is treated as boot. h. The answers would not change. There is no requirement that the transferors be individuals. Example 2 and Figures 4-1 and 4-2 28. a. None of the three individuals will recognize gain. The nonrecognition provisions of § 351 apply to all the exchanges. Example 5 b. Clyde will recognize gain of $260,000 ($350,000 – $90,000) on the exchange. Example 4 c.
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