d. Parakeet has a zero basis in the land and a basis of $300,000 in the plant. e
ID: 2556775 • Letter: D
Question
d. Parakeet has a zero basis in the land and a basis of $300,000 in the plant. e. None of the above. 42. George transfers cash of SI 50,000 to Gro use Corporation, a newly formed corporation, for 100% of the stock in Grouse worth $80,000 and debt in the amount of $70,000, payable in equal annual installments o $7,000 plus interest at the rate of 9% per annum. In the first year ofoperation, Grouse has net taxable income of $40,000. If Grouse pays George interest of $6,300 and $7,000 principal payment on the note: a. George has dividend income of $13,300 b. Grouse Corporation does not have a tax deduction with respect to the payment c. George has dividend income of $7,000 d. Grouse Corporation has an interest expense deduction of $6,300 e. None of the above. Adam transfers cash of S300000 and land worth S200000 to Camel Corporation for 100% of the stock in Camel. In the first year of operation, Camel has net taxable income of $70,000. If Camel distributes $50,000 to Adam: 43. a. Adam has taxable income of $50,000. b. Camel Corporation has a tax deduction of $50,000. c. Adam has no taxable income from the distribution d. Camel Corporation reduces its basis in the land to $150,000. e. None of the above. 4 Blue Corporation made loans to a customer, Cedar Corporation. In the current year, these loans become worthless a Blue Coeporation cannot claim a deduction for the worthless loans b. The loans provide a nonbusiness bad debe deduction to Blue Corporation. c. The loans provide Blue Corporation with a business bad debt d Blue Corporation may claim a capital loss as to these loans. e. None of the above 45. Art, an unmarried individual, transfers property (basis of $130,000 and fair market value of $120,000) to Condor Co poration In exchange for § 1244 stock. The transfer qualifies as a nontaxable exchange under $351 and Art's basis in the Condor stock is $130,000. Five years later, Art sells the Condor stock for $50,000. With respect to the sale, Art has: a. An ordinary loss of $80,000. b. An ordinary loss of $70,000 and a capital loss of S10,000. c A capital loss of $80,000 d. A capital loss of $30,000 and an ordinary loss of $50,000. e. None of the above. 46. Lymn transfers property (basis of $225,000 and fair market value of $300,000) to Falcon Corporation in exchange for § 1244 stock. The transfer qualifies as a nontaxable exchange under § 35 l. In the current year, Lynn sells the Falcon stock for $100,000. Assume Lynn files a joint return with her husband, Ricky. With respect to the sale, Lynn has: An ordinary loss of $125,000. b. An ordinary loss of $100,000 and a capital loss of $25,000. c. A capital loss of $125,000 a. d. An ordinary loss of $100,000 and a capital loss of $100,000. e. None of the above.Explanation / Answer
Answer
42.
D. Grouse Corporation has an interest expense deduction of $6,300.
The interest will be ordinary income to Georgeand produce a deduction to Grouse Corporation. Hence,The payment will be treated as a payment on the debt.
43.
Ans. is option A Camel Corporation has a tax deduction of $50,000.
The distributing company is not allowed to deduct payment of dividends. Here, the payment to Mr. A from the corporation will be considered as the distribution of dividend. The dividends are taxable in the hands of shareholders’, thus, the Mr. A has taxable income of $50,000.
44. Ans is B
You claim a nonbusiness bad debt deduction by filing IRS Form 8949, Sales and Other Dispositions of Capital Assets with your annual income tax return. In Part 1, line 1, enter the name of the debtor and the words "bad debt statement attached" in column (a). ... Use a separate line for each bad debt.
45.Ans is A capital loss of $30,000 and an ordinary loss of $50,000.
The basis of the stock is only $130000 for purpose of § 1244 tretment. the potential losss under § 1244 is $ ($130000-$50000) =$80000
However the § 1244 ordinary loss is limited to $50000 because art is unmarried. the capital loss is remaining $30000
46.
.Ans is B An ordinary loss of $100,000 and capital loss of $25,000
The basis of the stock is only $130000 for purpose of § 1244 tretment. the potential losss under § 1244 is $ ($225000-$100000) =$125000
However the § 1244 ordinary loss is limited to $100000.
The capital loss is remaining $25000
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