Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Seth, Pete, Cara, and Jen form Kingfisher Corporation with the following consideration: * Seth receives $6,000 in cash in addition to the 30 shares. **Pete

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
Seth, Pete, Cara, and Jen form Kingfisher Corporation with the following consideration: * Seth receives $6,000 in cash in addition to the 30 shares. **Pete receives $9,000 in cash in addition to the 30 shares. The value of each share of Kingfisher stock is $3,000. If there is no gain or loss, enter $0 for the amount. As to these transactions, provide the following information for parts (a) - (I). a. Seth's recognized gain or loss. Identify the nature of any such gain or loss. Seth recognizes $ as b. Seth's basis in the Kingfisher Corporation stock. c. Kingfisher Corporation's basis in the inventory. d. Pete's recognized gain or loss. Identify the nature of any such gain or loss. Pete recognizes a of $ e. Pete's basis in the Kingfisher Corporation stock. f. Kingfisher Corporation's basis in the equipment. g. Cara's recognized gain or loss. Cara's has of $ h. Cara's basis in the Kingfisher Corporation stock. i. Kingfisher Corporation's basis in the proprietary process. j. Jen's recognized gain or loss. Jen has of $ on the transfer. k. Jen's basis in the Kingfisher stock. 1. During discussions relating to the formation of Kingfisher, Seth mentions that he may be interested in either (1) just selling all of his inventory in the current year for its fair market value of $96,000 or (2) proceeding with his involvement in Kingfisher's formation as shown above but followed by a sale of his stock five years later for $90,000. What would be the tax cost of these alternative plans, stated in present value terms? Assume a discount rate of 6%. The present value factors at 6% are 1.000 for year 1 and 0.7473 for year 5 . Further, assume Seth's marginal income tax rate is 35% and his capital gains rate is 15%. If required, round your answers to the nearest dollar. The present value of Seth's tax cost associated with the current sale of inventory (aiternative 1) for $96,000 is \$ The present value of Seth's tax cost associated with the current receipt of 30 Kingisher shares and $6,000 cash (aiternative 2) and the subsequent saie of 30 Kinghisher shares for $90,000 in five years is $

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

Step: 3

blur-text-image

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

Her Majestys Auditor An Adventure Novel With Steampunk Elements

Authors: Markus Pfeiler

1st Edition

164953339X, 978-1649533395

More Books

Students also viewed these Accounting questions

Question

I am paid fairly for the work I do.

Answered: 1 week ago

Question

I receive the training I need to do my job well.

Answered: 1 week ago