Jessica owns 60 percent of hudson company inc the

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Income Tax Fundamentals 2020
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Chapter 10 / Exercise 9
Income Tax Fundamentals 2020
Altus-Buller/Whittenburg
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Question 39 Jessica owns 60 percent of Hudson Company, Inc. The firm needs some assets and all of the shareholders are considering contributing assets in a prearranged plan that would qualify all of them for Code Section 351 treatment. There has been no agreement among the parties as to the assets each would contribute, but it has been agreed that the fair market value of the assets contributed by each of them will be $150,000. Jessica is considering contributing 100 shares of XYZCompany, Inc. stock. Her basis in the shares is $200,000 and their fair market value is $150,000. Jessica is uncertain about the transaction. She is also considering selling the shares and contributing cash. Which of the following statements is correct? A. If Jessica contributes the shares, then she will be able to recognize a $50,000 loss. B. If Jessica sells the shares to Hudson Company, Inc. then she will be able to recognize $50,000 loss. C. If Jessica sells the shares on a national stock exchange and contributes $150,000 of cash to Hudson Company, Inc. she will be able to recognize a $50,000 loss. D. None of the above is correct.
Question 40 A “C” corporation must do which of the following with respect to its taxable year?
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Income Tax Fundamentals 2020
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Chapter 10 / Exercise 9
Income Tax Fundamentals 2020
Altus-Buller/Whittenburg
Expert Verified
Question 41 Paula receives a liquidating distribution from Pell Corporation as part of a redemption of all of its stock. Paula’s basis for her Pell stock is $10,000. In exchange for her stock, Paula receives property with an $8,000 basis and a $15,000 fair market value that is subject to a $2,000 mortgage, and also receives cash of $5,000. How much is Paula’s recognized gain?
Question 42 Paula receives a liquidating distribution from Pell Corporation. Paula’s basis for her Pell stock is $10,000. In exchange for her stock, Paula receives real estate with an $8,000 basis and a $15,000 fairmarket value that is subject to a $2,000 mortgage, and also receives cash of $5,000. What is Paula’s basis in the real estate she received?
Question 43 Ellen sells her Section 306 stock during the year for $16,000. Her basis in the stock was $2,000. In 2006, when she received the stock, its fair market value was $12,000 and the corporation’s earnings and profits were $10,000. Assuming that Ellen retains her common stock, the result of the sale is: A. $14,000 ordinary (dividend) income. B. $14,000 long-term capital gain. C. $10,000 ordinary (dividend) income and $4,000 long- term capital gain. D. $12,000 ordinary (dividend) income and $2,000 long-term capital gain.

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