Question
1. A taxpayer contributes property with an adjusted basis of $60,000 and a fair market value of $100,000 to his business entity. If the entity
1. A taxpayer contributes property with an adjusted basis of $60,000 and a fair market value of $100,000 to his business entity. If the entity is an S corporation and the transaction qualifies under § 351, the S corporation's basis for the asset and the shareholder's basis for his stock are:
Asset Basis . . . . . . . . . . . Stock Basis
a. 60,000 . . . . . . . . . . . . . . . $100,000
b. $100,000. . . . . . . . . . . . . $60,000
c. $60,000. . . . . . . . . . . . . . $60,000
d. $100,000. . . . . . . . . . . . .$100,000
e. None of the above.
2. Jasmine Company sold an asset on the first day of the tax year for $400,000. Its regular tax basis was $250,000, and its basis for Federal AMT purposes was $220,000. Because of differences in cost recovery schedules, the state basis in the asset was $200,000. What adjustment, if any, should be made to Federal taxable income in determining the correct taxable income for the typical state?
a. ($20,000).
b. ($50,000).
c. $50,000.
d. $100,000.
e. Some other amount.
3. Straw Corporation realized $800,000 of taxable income from the sales of its products in States X and Z. Straw's activities in both states establish nexus for income tax purposes. Straw's sales, payroll, and property among the states include the following.
| State X | State Z | Totals |
Sales | $6,000,000 | $4,000,000 | $10,000,000 |
Property | 500,000 | 1,500,000 | 2,000,000 |
Payroll | 2,000,000 | 2,000,000 | 4,000,000 |
Both states use a three-factor apportionment formula, however X utilizes a double-weighted sales factor in its three-factor apportionment formula. How much of Straw’s taxable income is apportioned to Z?
a. $330,000.
b. $386,668.
c. $440,000.
d. $470,000.
e. None of the above.
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