1.Joe contributed $7,000 of cash to JS Inc., a newly created S corporation for federal income tax purposes, and made a loan of $2,000 to JS Inc. During Year 1, JS Inc. generated ordinary income of $8,200 and tax exempt income of $2,000. Cash of $17,300 was distributed immediately prior to the end of Year 1. Joe is a single shareholder. No repayment was made to the loan and no interest was accrued to the loan.

a.State types and amounts of basis that Joe has in JS Inc. upon contribution

b.Compute AAA and OAA and explain the relationship between AAA/OAA and basis.

c.State types and amounts of basis that Joe has in JS Inc at year-end and potential tax consequence(s).

d.Sate types and amounts of basis that Joe has in JS Inc at year-end to the extent that loss of $17,300 was generated. For this question, assume all the facts remain the same except for the fact that no cash distribution was made.

e.Assume that the facts under Question 57d still applied. During Year 2, ordinary income of $2,100 was generated and no distribution was made. State types and amounts of basis at the end of Year 2.

2.If an investor buys one share of a C corporation at $200, what will be his/her after-tax return if the C corporation generates earnings and profits of $200 at the end of the year and distributes the $200. Note that 1) the C corporation and the investor are subject to the highest income taxes and 2) the dividend is treated as a qualified dividend, but not being subject to Medicare tax.

3.What if the investor buys one share of a REIT at $200, what will be his/her after-tax return if the REIT generates earnings and profits of $200 at the end of the year and distributes the $200.

4.How would the answers to Question 2 and 3 change under Trumps proposed plan?

5.Explain the difference between book capital account and tax capital account in partnership.