On January 2, Chaz transfers cash of $123,800 to a newly formed corporation for 100% of...

Transcribed Image Text:

On January 2, Chaz transfers cash of $123,800 to a newly formed corporation for 100% of the stock. In its initial year, the corporation has net income of $30,950. The income is credited to its eamings and profits account. The corporation distributes $9,285 to Chaz. If an amount is zero, enter "0". a. How do Chaz and the corporation treat the $9,285 distribution? Chaz has a taxable dividend of s 9,285 and the corporation has a deduction of 0 b. Assume instead that Chaz transfers to the corporation cash of $61,900 for stock and cash of $61,900 for a note of the same amount. The note is payable in equal annual installments of $6,190 and bears interest at the rate of 6%. No distributions are made during the year to Chaz. However, at the end of the year, the corporation pays an amount to meet the loan obligation(ie, the annual $6,190 principal payment plus the interest due). Determine the total amount of the payment and its tax treatment to Chaz and the corporation. The corporate payment to Chaz totals 6,190 of which 61,900 X Chaz has interest of t 3,714 and a note repayment of 3,714 is taxable to Chaz. The corporation has a deduction of s 3,714 v Feedba Check My Wen Vanous tax and nontax considerations are relevant when developing the capital structure of a corporation. The relative amounts of debt and equity and their characteristics are of primary importance. 0 more Check My Work uses remaining On January 2, Chaz transfers cash of $123,800 to a newly formed corporation for 100% of the stock. In its initial year, the corporation has net income of $30,950. The income is credited to its eamings and profits account. The corporation distributes $9,285 to Chaz. If an amount is zero, enter "0". a. How do Chaz and the corporation treat the $9,285 distribution? Chaz has a taxable dividend of s 9,285 and the corporation has a deduction of 0 b. Assume instead that Chaz transfers to the corporation cash of $61,900 for stock and cash of $61,900 for a note of the same amount. The note is payable in equal annual installments of $6,190 and bears interest at the rate of 6%. No distributions are made during the year to Chaz. However, at the end of the year, the corporation pays an amount to meet the loan obligation(ie, the annual $6,190 principal payment plus the interest due). Determine the total amount of the payment and its tax treatment to Chaz and the corporation. The corporate payment to Chaz totals 6,190 of which 61,900 X Chaz has interest of t 3,714 and a note repayment of 3,714 is taxable to Chaz. The corporation has a deduction of s 3,714 v Feedba Check My Wen Vanous tax and nontax considerations are relevant when developing the capital structure of a corporation. The relative amounts of debt and equity and their characteristics are of primary importance. 0 more Check My Work uses remaining