Balance Sheet and Tax Basis

calendar week 5 Problem Solution Set Accounting/547 October 5th, 2012 Chapter 15, 83 a) pregnant tax issues or concerns that may differ across entity types are * The billet structures flexibility * Protection of the obligation * The time and price of organizing the entity Significant non-tax issues or concerns that may differ across entity types are * saturnine of self-employment and FICA taxes * Flexibility of special allocations * Adding new owners b) My recommendation for forming CCS is LLC.I chose LLC because the organizing business members may contract their individual tax liabilities by operating as a LLC. CCS should be concerned about FICA and self-employment taxes. LLCs must pay self-employment taxes. As the business grows ago 3-4 years, I recommend CCS to look at the possibility of switching to and S Corporation. At this point, compensation needs may have reduced and the members would longing to fully benefit from self-employment tax removal. Chapter 19, 39 A. What amount of soak up or liberation does Zhang realize on the transfer of the property to her mountain? exit Realized = FMV( blood Received)+Mortgage AssumedAdjustedTax buttocks = $300,000 + $100,000 $410,000 Loss Realized= ($10,000) B. What amount of addition or loss does Zhang recognize on the transfer of the property to corporation. No loss is recognise on this transfer because of the requirements of Section 351. C. What is Zhangs tax behind in the stock she receives in the exchange? Tax keister = Substituted Basis of the Assets Transferred Assumed Mortgage = $410,000 $100,000 Tax Basis= $310,000 D. What is the corporations tax-adjusted basis in each of the assets received in the exchange?The corporations carryover basis is $400,000 the take account of assets received minus the aggregate loss on the assets transferred applied to land. Inventory = $10,000, Building = $100,000, and Land = $290,000. Assume the corporation assumed a mortgage of $500,000 attached to the build ing and land. Assume the unclouded market value of the building is now $250,000 and the fair market value of the land is $530,000. The fair market value of the stock remains $300,000. E. How much, if any, gain or loss does Zhang recognize on the exchange assuming the revise facts?Realized pull in $300K Stock FMV + $500K Mortgage $410K Aggregate Tax Basis = $390,000 Realized Gain Tax Basis of Property $500K $410K = $90,000 Zhang would recognize a gain of $90,000 on the transfer under the new conditions since the assumed liability is greater than the total tax basis of the transferred property. F. What is Zhangs tax basis in the stock she receives in the exchange? Tax Basis of Stock Received = Tax Adjusted Property Basis Transferred + Exchange Gain Recognized Mortgage Assumed $410,000 + $90,000 $500,000 = 0, Zhang can defer recognition of the $300,000 in stock. G. What is the corporations tax-adjusted basis in each of the assets received in the exchange? Inventory = $10,000 + ($ 20,000/$800,000 x $90,000) = $12,250 Building = $100,000 + ($250,000 / $800,000 x $90,000)= $128,125 Land= $300,000 + ($530,000 / $800,000 x $90,000) = $359,625 Total= Inventory + Building + Land = $12,250 + $128,125 + $359,625 Total = $500,000 The corporations total tax basis is the $410,000 carryover basis plus the gain recognized on the exchange.