Solved by verified expert :1431. CHAPTER
13—COMPARATIVE FORMS OF DOING BUSINESS Question TF #38
Roger owns 40% of the stock of Silver, Inc. (adjusted basis of $500,000).
Silver redeems 75% of his shares for $650,000. If the stock redemption
qualifies for return of capital treatment, Roger’s recognized gain is $150,000.
a.
True
b. False
1432. CHAPTER
13—COMPARATIVE FORMS OF DOING BUSINESS Question TF #39
In its first year of operations, a corporation projects losses of $200,000.
Since losses are involved, the corporation definitely should elect S
corporation status.
a.
True
b. False
1433. CHAPTER
13—COMPARATIVE FORMS OF DOING BUSINESS Question TF #40
Dave contributes land (adjusted basis of $30,000; fair market value of
$100,000) to Tan, Inc., in exchange for all of its stock. The land is
encumbered by a mortgage of $27,000 which Tan assumes. Since the transaction
qualifies for nonrecognition treatment under § 351, Tan’s adjusted basis for
the land is $73,000 ($100,000 – $27,000) and Dave’s adjusted basis for the
stock is $3,000 ($30,000 – $27,000).
a.
True
b. False
1434. CHAPTER
13—COMPARATIVE FORMS OF DOING BUSINESS Question TF #41
Amos contributes land with an adjusted basis of $70,000 and a fair market value
of $100,000 to White, Inc., an S corporation, in exchange for 50% of the stock
of White, Inc. Carol contributes cash of $100,000 for the other 50% of the
stock. If White later sells the land for $110,000, $35,000 [$30,000 +
50%($10,000)] is allocated to Amos and $5,000 ($10,000 ´ 50%) is allocated to
Carol.
a.
True
b. False
1435. CHAPTER
13—COMPARATIVE FORMS OF DOING BUSINESS Question TF #42
To the extent of built-in gain or built-in loss at the time of contribution,
partnerships may choose to allocate or not allocate this built-in gain or loss
to the contributing partner on the sale of the contributed property by the
partnership.
a.
True
b. False
1436. CHAPTER
13—COMPARATIVE FORMS OF DOING BUSINESS Question TF #43
If an individual contributes an appreciated personal use asset to a C
corporation in a transaction which qualifies for nonrecognition treatment under
§ 351, the corporation’s basis in the asset is the same as was the
shareholder’s adjusted basis.
a.
True
b. False
1437. CHAPTER
13—COMPARATIVE FORMS OF DOING BUSINESS Question TF #44
Wally contributes land (adjusted basis of $30,000; fair market value of
$100,000) to an S corporation in a transaction which qualifies under § 351. The
corporation subsequently sells the land for $120,000, recognizing a gain of
$90,000 ($120,000 – $30,000). If Wally owns 30% of the stock, $76,000 [$70,000
+ 30%($20,000)] of the $90,000 recognized gain is allocated to Wally.
a.
True
b. False
1438. CHAPTER
13—COMPARATIVE FORMS OF DOING BUSINESS Question TF #45
It is easier to satisfy the § 721 requirements for the nonrecognition of gain
or loss on partner contributions than it is to satisfy the § 351 requirements
for the nonrecognition of gain or loss on shareholder contributions.
a.
True
b. False
1439. CHAPTER
13—COMPARATIVE FORMS OF DOING BUSINESS Question TF #46
The profits of a business owned by Taylor (60%) and Maggie (40%) for the
current tax year are $100,000. If the business is a C corporation or an S
corporation, there is no effect on Taylor’s basis in her stock. If the business
is a partnership or an LLC, Taylor’s basis in her partnership interest or basis
in her stock is increased by $60,000.
a.
True
b. False
1440. CHAPTER
13—COMPARATIVE FORMS OF DOING BUSINESS Question TF #47
Carol is a 60% owner of a business entity and has an adjusted basis in such interest
of $60,000. For the current tax year, the entity has profits of $50,000. If the
entity is a C corporation, the corporate profits have no effect on Carol’s
basis in her stock. However, if the entity is an S corporation, Carol’s basis
increases to $90,000 [$60,000 + (60% ´ $50,000)].
a.
True
b. False
