Assignment Week 5 - carried back three years and carried...

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Week 5 Assignment Answers AC553 14-4 Section 351 allows certain transfers of property to a corporation to escape taxation, thus allowing the business to incorporated tax free. This allows taxpayers to postpone any gain or loss until there is a substantive change in the taxpayer's investment, which encourages investment in start-up enterprises. 14-20 C corporations may select any fiscal or calendar tax year. Other forms of organization are required to adopt the tax year of their owners unless a business purpose can be established. 14-22 Corporate taxpayers can claim capital losses only against capital gains. Individuals may claim up to $3,000 in capital losses against other forms of income. Corporate capital loss carryovers become short-term losses regardless of their original status, and they are
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Unformatted text preview: carried back three years and carried forward five years. 14-55 a. Susan has no gain or loss and her stock basis does not increase. Code Sec. 358. b. The corporation has no income from the capital contribution. Code Sec. 118. Its basis is zero since basis carries over. Code Sec. 362. c. If Susan receives 10 percent more stock, she will have to recognize her $2,000 of realized gain since she does not meet the 80 percent control requirement. Her basis in the stock equals $2,000, her cost basis. Code Sec. 1012. 14-62 The taxable income for the year is $62,000. Capital losses are deductible only against capital gains. The $5,000 long-term capital loss is carried back three years and forward five years....
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