Homework Answers
Answer.
There is no liabilities under built in gain, since the fair market value is higher than the adjusted tax basis, in both cases of properties.
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Notes:
Calculating the Built-in Gains Tax
Subtract the adjusted basis of the assets from their fair market value. Only if the adjusted basis number is higher than the fair market value will you have to pay the built-in gains tax.
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Basil, Inc, a “C” corporation makes an “S” election which is effective beginning January 1, 2018....
Accounting
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Exercise 20-15 (LO. 1) On January 4, 2018, Martin Corporation acquires two properties from a shareholder...
Exercise 20-15 (LO. 1) On January 4, 2018, Martin Corporation acquires two properties from a shareholder solely in exchange for stock in a transaction that qualifies under § 351, The shareholder's basis, the fair market value, and the built-in gain (loss) of each property are: Fair Market Built in Gain Shareholder's Basis $300,000 $525,000 or (Loss) $375,000 $75,000 $400,000 ($125,000) ($50,000) Value Property 1 Property 2 Net built-in loss Martin adopts a plan of liquidation later in the year and...
Old McDonald’s, Inc., a farm corporation, was incorporated as a C corporation on January 1, 1993....
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Question: Old McDonald’s, Inc., a farm corporation, was incorporated as a C corporation on January 1,...
Question: Old McDonald’s, Inc., a farm corporation, was incorporated as a C corporation on January 1, 1993. On January 1, 2015, the corporation made an election to be treated as an S corporation beginning in tax year 2015. At the time of the election, the corporation’s assets included 1,000 acres of unimproved farmland having a cost basis $2,250,000 and a fair market value of $7,000,000. A real estate developer has approached the shareholders with an offer to purchase the land...
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On January 1, 2016,Plymouth Corporation acquired 80 percent of the outstanding votingstock of Sander...
On January 1, 2016, Plymouth Corporation acquired 80 percent of the outstanding voting stock of Sander Company in exchange for $1,200,000 cash. At that time, although Sander’s book value was $925,000, Plymouth assessed Sander’s total business fair value at $1,500,000. Since that time, Sander has neither issued nor reacquired any shares of its own stock.The book values of Sander’s individual assets and liabilities approximated their acquisition-date fair values except for the patent account, which was undervalued by $350,000. The undervalued...
On January 1, 2016, Parflex Corporation exchanged $344,000 cash for 90 percent of Eagle Corporation’s outstanding...
On January 1, 2016, Parflex Corporation exchanged $344,000 cash
for 90 percent of Eagle Corporation’s outstanding voting stock.
Eagle’s acquisition date balance sheet follows:
Cash and receivables
$
15,000
Liabilities
$
76,000
Inventory
35,000
Common stock
150,000
Property and equipment (net)
350,000
Retained earnings
174,000
$
400,000
$
400,000
On January 1, 2016, Parflex prepared the following fair-value
allocation schedule:
Consideration transferred by Parflex
$
344,000
10% noncontrolling interest fair value
36,000
Fair value of Eagle
380,000
Book value of...
On January 1, 2016, Parflex Corporation exchanged $344,000 cash for 90 percent of Eagle Corporation’s outstanding...
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37. On January 1, 2017. Paloma Corporation exchanged $1.710.000 cash for 90 percent of the cut-...
37. On January 1, 2017. Paloma Corporation exchanged $1.710.000 cash for 90 percent of the cut- standing voting stock of San Marco Company. The consideration transferred by Paloma provided a reasonable basis for assessing the total January 1, 2017, fair value of San Marco Company. At the acquisition date, San Marco reported the following owners' equity amounts in its balance sheet: Common stock .... $400.000 Additional paid-in capital........ 60.000 Retained earnings. 265,000 In determining its acquisition offer, Paloma noted that...
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On January 1, 2016, Plymouth Corporation acquired 80 percent of the outstanding voting stock of Sander Company in exchange for $1,200,000 cash. At that time, although Sander's book value was $925,000, Plymouth assessed Sander's total business fair value at $1,500,000. Since that time, Sander has neither issued nor reacquired any shares of its own stock. The book values of Sander's individual assets and liabilities approximated their acquisition-date fair values except for the patent account, which was undervalued by $350,000. The...
On January 1, 2016, Parflex Corporation exchanged $344,000 cash
for 90 percent of Eagle Corporation’s outstanding voting stock.
Eagle’s acquisition date balance sheet follows:
Cash and receivables
$
15,000
Liabilities
$
76,000
Inventory
35,000
Common stock
150,000
Property and equipment (net)
350,000
Retained earnings
174,000
$
400,000
$
400,000
On January 1, 2016, Parflex prepared the following fair-value
allocation schedule:
Consideration transferred by Parflex
$
344,000
10% noncontrolling interest fair value
36,000
Fair value of Eagle
380,000
Book value of...
Adams, Inc., acquires Clay Corporation on January 1, 2017, in exchange for $510,000 cash. Immediately after the acquisition, the two companies have the following account balances. Clay's equipment (with a five-year remaining life) is actually worth $440,000. Credit balances are indicated by parentheses. Current assets Investment in Clay Equipment Liabilities Common stock Retained earnings, 1/1/17 Adams $ 300,000 510,000 600,000 (200,000) (350,000) (860,000) Clay $ 220,000 0 390,000 (160,000) (150,000) (300,000) In 2017, Clay earns a net income of $55,000...
37. On January 1, 2017. Paloma Corporation exchanged $1.710.000 cash for 90 percent of the cut- standing voting stock of San Marco Company. The consideration transferred by Paloma provided a reasonable basis for assessing the total January 1, 2017, fair value of San Marco Company. At the acquisition date, San Marco reported the following owners' equity amounts in its balance sheet: Common stock .... $400.000 Additional paid-in capital........ 60.000 Retained earnings. 265,000 In determining its acquisition offer, Paloma noted that...
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