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Unformatted text preview: C2-3Bruce and Bob organized Black LLC on May 10 of the current year. What is the entity's default tax classification? Are any alternative classification (s) available? If so, 1) how do Bruce and Bob elect the alternative classification(s) and (2) what are the tax consequences of doing so?Since the organization Black LLC was organized by both Bruce and Bob the default tax classification would be partnership since there would be more than one owner involved. Thefore, I believe that the default tax classification would be partnership. Yes, there are other alternative classification for the LLC organization should the organization elect to be taxed as an corporation as well1) Should Bruce and Bod elect the alternative classification they would do this by first completing and filing the form 8832 ( Entity Classification Election ) with the IRS. The "form must be signed by each owner, or office manager and the signature must specify the date on which the election will be effective. The effective date cannot be more than 75 days before or 12 months after the date the enty files the form". As well the form must be filed with the organizations tax return for the electrion year.2) The tax consequences of doing so "if a parnership election to be taxed as a coproration the partnership is deemed to distribute its assets to the partnerships who ae then an eligible entity that previously elected to b taxed as a corporation subsequently elects to be treated as a partnership". C2-54 On March 1 of the current year, Alice, Bob, Carla, and Dick form Bear Corporation and transfer the following items: Property Transferred Transferor Asset Basis to Transferor FMV Alice Land 12,000 30,000 Building 38,000 70,000 400 Mortgage on the land and buildin 60,000 60,000 850 Bob Equipment 25,000 40,000 300 Carla Van 15,000 10,000 50 Dick Accounting services 10,000 100 Alice purchased the land and building several years ago for $12,000 and $50,000, repectively, Alice has claimed straight-line depreciation on th4 building. Bob also receives a Bear note for $10,000 due in three years. The note bears interest at the prevailing market rate. Bob purchased the equipment three years ago for $50,000. Carla also receives $5,000 at the prevailing market rate....
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This note was uploaded on 01/14/2012 for the course ACCOUNTING ACC 455 taught by Professor Unknown during the Spring '11 term at University of Phoenix.
- Spring '11