Question
.AandB,twoindividuals,formedCCorporation(acalendaryearCcorporation)onJanuary1ofYear1. Onthat date, A transferred property (stock in Y Corporation representing 1% ownership a capital asset) with a fair market value (FMV) of $100,000 and
.AandB,twoindividuals,formedCCorporation(acalendaryearCcorporation)onJanuary1ofYear1. Onthat date, A transferred property (stock in Y Corporation representing 1% ownership a capital asset) with a fair market value (FMV) of $100,000 and an adjusted basis of 110,000 to X in exchange for 10 shares of stock, and B transferred property (a capital asset) with a FMV of $59,000 and an adjusted basis of $2,000 and $41,000 of services (which were section 248 organizational expenses) in exchange for 10 X shares. X began operations on January 1 of Year 1.
In Year 1:
X received a $3,000 dividend from Y on December 23, Year 1 X received revenue of $30,000 X purchases a Section 179 asset for $20,000 on January 1 of Year 1 X distributed $5,000 cash to each of A and B on October 1, Year 1 On December 30 X sold the Y stock contributed by A for $95,000
In Year 2:
X received revenue of $14,000 On April 23, Year 2, X sold the property contributed by B for $12,000 X distributed $10,000 cash to each of A and B on May 5, Year 2 On July 15, Year 2, A sold all 10 X shares to individual D for $90,000 On October 1, Year 2, X distributed $10,000 cash to each of B and D
In Year 3: X went out of business and B and D each received $0 for their shares
Assuming any / all elections are made to reduce taxable income in the current year.
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What is X Corporations taxable income in Year 1 ___________________________?
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What is X Corporations Accumulated E&P at the beginning of Year 2 _______________________ ?
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What is X Corporations Current E&P generated in Year 2 __________________?
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What income, gain or loss if any, does B recognize, in Year 1 _______________________________?
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What income, gain or loss, if any, including character (meaning capital or ordinary) does D recognize
in Year 2 (as a result of the May 5 distribution) _______________________________?
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What income, gain or loss, if any, including character, does A recognize as a result of selling 10 shares
of X stock to D for $90,000 on July 15, Year 2 __________________________?
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What income, gain or loss, if any, including character does D recognize as a result of receiving $0 for
Ds shares of X stock ________________?
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