Week 5 Assignment Aviles - Tax - Week 5 Assignment Question...

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Week 5 Assignment Question 14-24. What is the purpose of the dividends-received deduction? What corporations are entitled to claim this deduction? What dividends qualify for this deduction? The purpose of the dividends received deduction is to reduce the amount of taxable events when a company earns a profit and pays dividends to shareholders. The dividends that qualify for this deduction are those paid out of the corporate earnings by domestic corporations subject to the US corporate income tax. Question 14-51. What is the purpose of the reconciliation of taxable income with book income? The purpose of the reconciliation of taxable income with book income would be to establish ascertain temporary and permanent differences. The net income on the financial books of a corporation may differ from the taxable income declared on its tax return. These differences are caused by the accounting methods used in financial and tax accounting rules. The differences used to determine financial and taxable income may be temporary or permanent. Permanent differences include income, deductions gains, and losses that may affect either book or taxable income. Problem 14-52 Sam Rogers forms a corporation. Sam transfers to the corporation property having a basis to him of $15,000 and a fair market value of $27,000 for 900 shares of the $10 par stock of the corporation. A year later, Bill Morrison, who is not related to Sam, transfers property having a basis to him of $1,000 and a fair market value of $3,000 for 100 shares of the corporate stock. The corporation issued no other stock. a. How much gain does Sam recognize on his exchange? What is the basis to Sam of his 900 shares? $27,000 - $15,000 = $12,000. Sam recognizes a gain of $12,000. His basis is $15,000 . b. How much gain does Bill recognize on his exchange? What is the basis to Bill of his 100 shares? $3,000 - $1,000 = $2,000. Bill’s basis is $1,000. c. What gain or loss is recognized by the corporation when it issues its shares to Sam?
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This note was uploaded on 02/05/2012 for the course ACCT 557 ACC 557 taught by Professor None during the Fall '10 term at Keller Graduate School of Management.

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Week 5 Assignment Aviles - Tax - Week 5 Assignment Question...

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