ASSUME ALL CORPORATIONS ARE C CORPORATIONS
Jill Smith and her husband John Smith, along with their friend
Paul Yang, formed a corporation-J and J Corp. on 6/15/2014. The
corporation is a manufacturer of tires which it sells to the retail
market.
Jill contributed $500,000 for a 45 common shares of the company.
John contributed a building with an adjusted basis to him of
$200,000 and a fair market value of $500,000 for 45 common shares
of J and J Corporation. Paul contributed services worth $55,000 for
the 10 remaining shares of the J and J.
1- Is his a taxable exchange under IRC 351?
2 - What are the tax implications to Jill, John and Paul
3-What is the basis of the stock to Jill, John and Paul
4-what is the basis of the building to J and J Corp?
1) This is not a taxable exchange under IRC 351. No gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control of the corporation.
2) No tax implication to Jill. No tax implication to John. Paul contributes services and so $55000 will be treated as business income.
3) The basis of the stock to Jil, John and Paul will be $500000, $200000, $55000.
4) The basis of the building will be $500000.
ASSUME ALL CORPORATIONS ARE C CORPORATIONS Jill Smith and her husband John Smith, along with their...
ASSUME ALL CORPORATIONS ARE C CORPORATIONS In year 3, the Corporation liquidates their operations and the following information is provided: Accumulated earnings and profits 150,000 Fair Market value of Building $550,000 Basis of Stock: Jill $500,000, John 500,000, Paul 27,500 The distribution is As follows: Jill receives $525,000, Paul receives $50,000 and John receives the building in a total liquidation process. 1. What are the tax ramifications to J and J Corporation? 2. what are the tax ramifications to Jill,...
ASSUME ALL CORPORATIONS ARE C CORPORATIONS Corporation X-a C Corporation-distributed the following to its sole shareholder-John-during the year: Inventory-cost/basis of $5,000 with a fair market value of $9,000. The following facts are provided: Corp X has accumulated E and P of $ 12, 000 and current E and P of $2,000 - without regard to this distribution. Corp X's tax rate is 21 percent. John has a basis in the corporate stock of $23,000. 1. What are the tax effects...
ASSUME ALL CORPORATIONS ARE C CORPORATIONS Corporation X-a C Corporation-distributed the following to its sole shareholder-John-during the year: Inventory-cost/basis of $5,000 with a fair market value of $9,000. The following facts are provided: Corp X has accumulated E and P of $ 12, 000 and current E and P of $2,000 - without regard to this distribution. Corp X's tax rate is 21 percent. John has a basis in the corporate stock of $23,000. 1. What are the tax effects...