Exam 2 Cheat Sheet

Exam 2 Cheat Sheet - Chapter 6 Ques: Lake Corporation...

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Chapter 6 Chapter 9 Chapter 10 Rules Ques : Lake Corporation distributes a building used in its business to Sandy in exchange for all of her Lake stock. Sandy's basis in her stock is $30,000 and the property she receives has a $90,000 FMV. The property's basis prior to the liquidating distribution was $25,000. - What are the tax consequences of the distribution to Sandy? Ansr: 90 (fmv) – 30 (basis) = 60 cap gain holding period day after distrib - What are the tax consequences to Lake Corporation? Ansr: 90 (fmv) – 25 (basis) = 65 sec1231 gain Ques: Jan contributes land with a basis of $200,000 and a fair market value of $245,000 to the JM partnership for a 50% interest. As a result of the contribution, how much gain will Jan recognize? Ansr: 0 giving property for partnership NEVER results in a gain Ques: Stephanie contributed land with a $9,000 basis and a $16,000 FMV to ST Partnership six years ago. This year, the land is distributed to Taylor, another partner in the partnership. At the time of distribution, the land had a $22,000 FMV. - How much gain should Stephanie and Taylor recognize? Ansr: Steph = 16 (fmv) – 9 (basis)= 7 Taylor = 0 - What is the impact of the distribution on Stephanie’s partnership basis? Ansr: 7 increase - What is Taylor’s basis in the land? Ansr: 16, carry over basis Disqualified Losses: Related party owns >50% then check following: If distributions are not distributed pro-rata or property is disqualified property (Sec 351 transaction or contrib. of capital within 5 years) If property has built in loss If 351 transaction or contribution of capital and plan of liquidation At Risk Basis: Overall basis – nonrecourse liability Ques: Mary receives a liquidating distribution from Snell Corporation as part of a redemptionof all of its stock. Mary's basis in the Snell stock is $10,000. In exchange for her stock, Mary receives property with an $8,000 basis and a $15,000 FMV that is subject to a $4,000 mortgage. Mary also receives cash of $5,000. - What are the tax consequences of the distribution to Mary? Ansr: [5 + (15(fmv)-4(mrtg)] +10 = 6 basis in property is 15 - What are the tax consequences to Snell Corporation? Ansr: 15 (fmv) – 8(basis) = 7 gain Ques: Doug purchases a 20% interest in the QuixPartnership for $10,000 on January 1, 2007, and begins to materially participate in the partnership's business. The QuixPartnership uses the calendar year as its tax year. At the time of the purchase, the Quix Partnership has $4,000 in liabilities, and Doug's share is 20%. What is Doug's basis in his partnership interest on January 1st? Ansr: 10 + (4 x .2) = 10.8…. . Existing Liabilities always increase the share of partnership interest Ques: Two years ago, Tom contributed investment land with a basis of $50,000 and FMV of $62,000 to the RST Partnership. This year Tom has a basis in his
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This note was uploaded on 04/08/2008 for the course BACC 442 taught by Professor Moshier during the Spring '08 term at SUNY Albany.

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Exam 2 Cheat Sheet - Chapter 6 Ques: Lake Corporation...

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