C11-Chp-13-2-HW-Prb-Compare Organizations

C11-Chp-13-2-HW-Prb-Compare Organizations -...

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3c9c878be21084b1162fde14798da29a8412154e.doc Page 1 First Name Last Name: Home work-Chapter 13. Turn in your answer sheet at the start of class. (5 points per question.) 1 Peggy contributed real estate to a new business in return for a 50% interest in capital and profits. On the same day, the other investor contributed cash of $50,000 for the remaining 50% interest. The real estate contributed by Peggy had a fair market value of $90,000, an adjusted basis of $10,000, and was subject to a $40,000 mortgage which was assumed by the partnership. What was Peggy’s recognized gain if the new business is a C corporation of a partnership? C Corporation Partnership a. $0 $0 b. $30,000 $30,000 c. $30,000 $10,000 d. $10,000 $30,000 2 Repeat the preceding question. What is the basis of the real estate to the business? If it is a C Corporation If it is a Partnership a. $0 $0 b. $40,000 $10,000 c. $10,000 $10,000 d. $10,000 $30,000 3 Repeat the preceding question. What is Peggy's basis in her business interest? If it is a C Corporation If it is a Partnership a. $0 $0 b. $40,000 $10,000 c. $10,000 $10,000 d. $10,000 $30,000 [Note: Since a partner is not fully relieved of a mortgage on property contributed to the entity, Peggy might not be willing to invest this property for a 50% capital interest, as she would for a 50% stock interest in a corporation.] 4 Jan is married and files a joint return. The joint return does not have unusually large personal deductions. The joint return does not contain substantial amounts of income other than the income from the business described below. Jan operates an unincorporated office supply business that has the following income statement each year: Sales $2,000,000 Operating expenses 1,800,000 Net income $ 200,000 Jan is considering incorporating the business. If the business is incorporated, she will draw a salary of $100,000, and the corporation will not pay dividends. Retained earnings will be reinvested in additional warehouse space and delivery equipment. The corporation is not expected to have surplus funds in the forseeable future. Which of the following organizational forms is likely to result in the lowest total income tax burden? a . Proprietorship b. Corporation without S election c. Corporation with S election 5 Which of these business entities involve the potential for paying compensation to owners that will be considered unreasonably low by the IRS? a . C corporation b. S corporation c. Partnership
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3c9c878be21084b1162fde14798da29a8412154e.doc Page 3 6 Jan started two corporations on January 1, 2008: (1) Computer Repair Corporation and (2) a Web Consulting Corporation. She elected S status for the web consulting corporation. The income statements for these two corporations are shown below for 2008. Computer Repair
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This note was uploaded on 03/09/2012 for the course ACCT 6120 taught by Professor Godfrey,h during the Spring '08 term at UNC Charlotte.

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C11-Chp-13-2-HW-Prb-Compare Organizations -...

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