LO.5 Amber holds a 20% interest in a business to which she contributed $100,000 as part of
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LO.5 Amber holds a 20% interest in a business to which she contributed $100,000 as part of the initial ownership group. During the life of the business, the following have occurred.
l $200,000 cumulative losses, first three tax years.
l $150,000 operating profit in the fourth tax year.
l $75,000 distribution to owners at the end of the third tax year.
l $60,000 payment to redeem 25% of Amber’s ownership interest at the end of the fourth year. No other ownership redemptions have occurred.
Determine the tax consequences to Amber if the entity is organized as:
a. A partnership.
b. An S corporation.
c. A C corporation.
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Related Book For
South Western Federal Taxation 2011 Taxation Of Business Entities
ISBN: 9780538498616
14th Edition
Authors: James E. Smith, William A. Raabe, David M. Maloney
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