Taxation
Entity was formed several years ago. At the beginning of this year, Chris acquired a 35% interest in the Entity by transferring property worth $65,000 in which she had basis of $50,000. At the beginning of this year, the Entity had recourse debt of $200,000. This year, Chris loaned $20,000 (bona fide debt) to the Entity. The entity’s results for the year are as follows:
Loss from operations ($520,000)
LTCG 40,000
Municipal bond interest income 32,000
Charitable contributions 4,000
Interest expense related to muni bond 8,000
In addition, during the year, Chris received a distribution of $48,000. If the entity is a C corporation, the distribution is a dividend.
At the end of the year, the Entity’s balance sheet shows a recourse debt balance of $100,000. The Chris Loan balance remains unchanged.
Required:
1. Assume Entity is a General Partnership – Compute Chris’s outside basis.
2. Assume Entity is an S corporation – Compute Chris’s outside basis.
3. Assume Entity is a C corporation – Compute Chris’s outside basis.
Problem 2
A Us entity that begin business last year shows the following information in its current year financial statement records:
Net Income per Books: 600,000
Included in Net Income per Books are the following items:
Federal Income Tax Expense 150,000
Property Taxes 30,000
Dividends Received from a 17% Owned Corporation 200,000
Net 1231 Loss 45,000
Short-Term Capital Gain 55,000
Long- Term capital Gain 75,000
Short term capital loss 25,000
Charitable Contributions 60,000
Last year, the entity generated a tax loss of 30,000
Required (a and b):
a) Assume that the corporation is a C corporation. Provide a schedule showing the corporation’s taxable income for the year.
b) Assume that the corporation is an S corporation. Compute the corporation’s non-separately stated ( ordinary income) and separately stated items.
