Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On lanuary 2, Chaz transfers cash of $79,000 to a newly formed corporation for 100% of the stock. In its initial year, the corporation has

image text in transcribed
On lanuary 2, Chaz transfers cash of $79,000 to a newly formed corporation for 100% of the stock. In its initial year, the corporation has net income of $19,750. The income is credited to its earnings and profits account. The corporation distributes $5,925 to Chaz. If an amount is zero, enter " 0 ". a. How do Chaz and the corporation treat the $5,925 distribution? Chaz has a of 5 X and the corporation has a deduction of \$ b. Assume instead that Chaz transfers to the corporation cash of $39,500 for stock and cash of $39,500 for a note of the same amount. The note is payable in equal annual installments of $3,950 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(i.e., the annual $3,950 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 \& x. Chaz has interest of $ X and a note repayment of x of which 5 X is taxable to Chaz. The corporation has a deduction of 4

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

High Performance Cloud Auditing And Applications

Authors: Keesook J. Han, Baek-Young Choi, Sejun Song

1st Edition

1493944355, 978-1493944354

More Books

Students also viewed these Accounting questions