. Allied Technologies, an S corporation, is owned by Betty (25%), Chuck (35%) an
ID: 2481880 • Letter: #
Question
. Allied Technologies, an S corporation, is owned by Betty (25%), Chuck (35%) and Diana (40%). Betty and Chuck also each own one-half of the stock of the Portland Exporting Corporation, also an S corporation.
(a) If Allied sells investment real estate which it purchased two years ago for $40,000 to Portland for $20,000, what will be the result to Allied? See §267.
(b) What difference would it make in (a), above, if Portland were a C corporation?
(c) Assume Allied is an accrual method taxpayer and owes $1,500 to Betty (a cash method taxpayer) for her December salary. If Allied pays the salary on January 15 of the following year, what will be the tax results to Allied and Betty (assuming both are calendar year taxpayers?) See §267(e).
Explanation / Answer
Solution.
(a) If allied sells investment real estate which is purchased two yers ago for $40,000 to Portland for $20,000 then the Allied would be liable to pay the tax and there is no exemption for Allied Technologies as per U.S. code §267.
(b) If the Portland were a C corporation then the taxable liablility would not be in the hands of Allied Technologies as it is not concerned with the S corporation as per U.S. code §267.
(c) If Allied is an accrual method taxpayer and owes $1,500 to Betty ( a cash method taxpayer ) for her December salary. If Allied pays the salary on January 15 of the following year, then it would be taxable in the same accounting year in which it accrued i.e. December not on January 15 as per U.S. code §267.
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