Axel and Rose set up an S corporation. Axel contributes cash of $50,000 and Rose contributes...
Axel and Rose set up an S corporation. Axel contributes cash of $50,000 and Rose contributes land worth $50,000 (her basis is $30,000). Axel lends the corporation $10,000. A. What is the basis for Axel and Rose? B. What is the tax effect on Axel if the following occurs: Year one: his share of the undistributed income is $20,000 Year two: his share of the corporation loss is $75,000
Homework Answers
Answer:
A. Axel's basis = Cash Contrbution + Lended value to corporation
= $50000 + 10000
= $ 60000
Rose basis = Land contribution
= $ 30000
B.
Share of income = 20000
Share of loss = 75000*50% = 37500
Axel not need to pay any tax as loss is higher than income.
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