ACC 317: ADVANCED FEDERAL TAXATION (SPRING 2012)

1. Question (5 points): Alpha Corporation, Beta Corporation, and Cappa Corporation form the ABC Partnership. Alpha owns 40% of the partnership profits and capital, and uses a June 30 tax year. Beta owns 30% of partnership profits and capital and also uses a June 30 tax year. Cappa owns 30% of partnership profits and capital and uses a September 30 tax year. What tax year must the ABC Partnership adopt?

2. Question (5 points): Argo Corporation, which uses a June 30 tax year, forms an equal partnership with Bango Corporation, which uses a July 31 tax year. What tax year must the partnership adopt?

3. Facts (8 points): Reia and Long to go into business together to make action films such as National Treasure 5: The Ghosts of Foggy Bottom. They form the RL Partnership. Long contributes $50,000 cash and a parcel of land with a fair market value of $50,000 and an adjusted basis of $20,000, while Reia contributes $100,000 cash. Long and Reia agree to comply with The Big Three, to share all profits and losses equally, and to use the traditional method in making 704(c) allocations. RL sells the parcel of land for $70,000.

a. Question (4 points): What are RL's tax gain (if any) and book gain (if any) on the sale of the land?

b. Question (4 points): How are the tax gain (if any) and book gain (if any) allocated between Long and Reia?