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choice_of_entity - the corporation He contributes the land...

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Topic: Trapping of appreciation & choice of entity Kirk owns land with a basis of $40,000 and fair value of $100,000. Kirk decides to start a business that will use the land. For his initial investment, he contributes the land. After several years the fair value of the land is still $100,000. Kirk decides he no longer wants to run the business, so he completely liquidates the business. Required : Compute the tax implications for Kirk (assume a marginal tax rate of 35%) and the business under the following independent situations. 1. Kirk decides to form a C corporation (assume a marginal tax rate of 34% for
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Unformatted text preview: the corporation). He contributes the land in exchange for 100% of the stock in a nontaxable Sec. 351 transaction. 2. Kirk decides to form an S corporation. He contributes the land in exchange for 100% of the stock in a nontaxable Sec. 351 transaction. 3. Kirk decides to form a partnership (or a multi-member LLC). He contributes the land to the partnership in exchange for a 50% partnership interest in a nontaxable Sec. 721 transaction. Assume the other 50% partner contributes a similar appreciated asset....
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