1. How are the following entities treated under the check the box regulations assuming no election is made:

a) An LLC owned by two members

b) An LLC owned by one individual

c) A C corporation

d) An LLC wholly owned by a C corporation

2. Rose bought a piece of land 3 years ago for $1. Today the fair market value is $100 and she transfers it to Flower Inc, a corporation, in exchange for all 100 of Flowers voting common stock. There are no other shareholders.

a) Does Rose recognize gain on the transfer?

b) What is Roses basis in the stock?

c) What is Roses holding period in the stock?

d) What is Flowers basis in the land?

e) What is Flowers holding period for the land?

f) Would your answer to parts (b) and (d) change (and if so how) if the fair market value of the land were $50 and Roses basis was $75?

g) Would the answer to part (c) change if instead of transferring land Rose transferred inventory?

3. Using the original facts of the previous question except that Rose also received from Flower $5 in cash in addition to the stock (which is now worth $95):

a) How much if any gain does Rose recognize?

b) What is Roses basis in Flower?

c) What is Flowers basis in the land?

d) Instead of $5 cash, Rose receives $5 FMV machine. Does the answer to part (a) change, and what is Roses basis and holding period for the machine?

4. Annette owns land worth $75 (adjusted basis of $1). She transfers it to Landcorp for voting common stock worth $75. At the same time Helmut agrees to provide legal services for Landcorp in exchange for stock worth $25. There is no other stock in Landcorp.

a) Does Annette recognize gain on the transfer and if yes, how much?

b) What is Landcorps basis in the land?

c) Does the answer change (and if so how and why) if Helmut receives the stock worth $25, for services worth $20 and fixed assets worth $5?

d) What if Helmut owned the original 100 shares for several years and they are worth $100. Annette transfers land to Landcorp worth $400 (adjusted basis was $12) for 400 new shares voting shares. Would Annette recognize gain on the transfer of the land?

5. Victoria owns land worth $450 in which she has a basis of $125. The land is subject to a mortgage of $100 which Victoria took out several years ago in order to buy the land. She transfers the land to Bari Corp in exchange for all its common stock, and Bari assumes the mortgage.

a) Does Victoria recognize gain on the transfer and if yes, how much?

b) What is Victorias basis in the stock?

c) What is Baris basis and holding period in the land?

6. Would your answer to the previous question change (and if so how and why) if the land were subject to a mortgage of $200 which the corporation assumes? Answer separately as to parts a, b, and c.

7. Capital Corp has the following capital gains and losses in its first 6 years of existence. Assume in each of the years it had taxable income of $20,000,000.

Year 1 Long term capital gains $10,000

Year 2 Short term capital gains $20,000

Year 3 Short term capital loss ($25,000)

Year 4 Long term capital gains $30,000

Year 5 Long term capital loss ($55,000)

Year 6 Short term capital gains $80,000

a) What rate of tax would Capital pay on its gains when it filed its initial tax return for year 1?

b) How much if any of the short term capital gain will be reported on the year 6 tax return?

c) Assume in year 7 Capital has a long term capital loss of $160,000. How much carryover will it have and how long will capital have to be able to use this loss?

8. In year 1, a corporation has taxable income of $1 million before deducting an otherwise allowable charitable contribution of $150,000. There are no carrybacks to the current year, no DPAD, and no dividends received deduction but there is a $10,000 NOL carryover that was deducted in arriving at the $1 million taxable income. All of the corporations income is from the sale of inventory.

a) How much if any charitable contribution is the corporation entitled to?

b) What if anything happens to any part of the contribution that cant be deducted in year 1?

c) In year 2 the corporation has an NOL of $30,000 that it carries back to year 1. What happens to the charitable contribution in year 1?

d) In year 3 the corporation has taxable income of $100,000, there is no DPAD, and no dividends received deduction and it makes otherwise deductible charitable contributions of $8,000. How much charitable contribution can the corporation deduct, and what years does it come from?

e) Can an accrual basis corporation deduct an otherwise deductible charitable contribution that is not paid until the following year? If yes, what if any requirements are necessary?

9. A corporation has gross income from services of $700,000 and deductible compensation expense of $100,000. In addition, the corporation receives dividend income from U.S. corporations in which it owns less than 1% of the stock, in the amount of $200,000. Assume the corporation does not qualify for the U.S. Domestic Production Activities Deduction.

a) Show the computation of the corporations taxable income for the year.

b) Suppose the gross income from services was $70,000 but all other figures are the same. Compute the taxable income.

c) Suppose the gross income from services was $30,000. Compute the taxable income.

10. A corporation has gross income of $800,000 and deductible expenses of $850,000 in the current year. All of the income is from sales of inventory. In the three years prior to the current year the corporation had taxable income of $300,000 (three years ago) $20,000 (two years ago) and $110,000 last year. What are the tax consequences to the corporation in the current year, what alternatives does it have, and what would you recommend as the tax advisor? State any additional information or assumptions necessary to make your recommendation.