Reference no: EM132451600
Problem 1 - FACTS
Vine Inc purchases a 20% interest in Delta LP (a Limited Partnership) interest (taxed as a tax partnership) for $10 Million cash at the beginning of 2014.
Delta LP had $0 Million debt at the beginning of 2014 and $8 Million at year end 2014. Partners share in debt based on their capital and profit interest.
Delta LP reported $5 Million Taxable Income for 2014 and Vine received a 20% distributive share of the income.
Delta LP made $2 Million cash distribution to partners in 2014 and Vine recieved 20%.
Required - Compute the year end 2014 tax basis Vine Inc has in Delta LP.
Problem 2 - FACTS
Joel, Boot Inc, Julie, and Mavon LLC fom a Limited Partnership (zz LP) and the entity uses tax partnership for tax purposes.
Joel contributes $2 Milion cash.
Boot Inc contributes intellectual property (IP) with a $12 Million FMV and $1,500,000 tax cost. The IP has a $2 Million loan attached that also gets contributed to the tax partnership.
Julie contributes a patent with $2 Million FMV and $500,000 tax cost.
Mavon LLC contributes a building with $7 Million FMV and $3 Million Tax Cost with a $1 Million Loan attached.
Joe has a 10% interest, Boot Inc has a 50% interest, Julie has a 10% interest, and Mavon LLC has 30% interest in the tax partnership (interest here for all is defined as an interest in capital and profits).
Required - You are to compute a FMV and tax cost balance sheets for zz LP at formation date using the above information. The balance sheet one requires a listing of assets, debt and capital accounts for each tax partner at FMV. The balance sheet two requires a listing of assets, debt and capital account for each tax partner at tax cost. Or, you can do one balance sheet and place the FMV accounts and Tax cost accounts in separate columns.
Problem 3 - FACTS
Once you compute the tax cost balance sheet in #3, you can solve this problem.
As, you use the same fact situation from #2.
Required - Compute the adjusted tax cost (basis) of Boot Inc's interest in the tax partnership.
Problem 4 - FACTS
Pecan Inc. (operating as a tax S corporation) is in its first year of operations. We are now at the end of the year.
Pecan Inc. has two shareholders: Daniel owns 400 shares and Monica owns 600 shares. The two shareholders have owned the shares the full year.
The corporation received $1,000,000 total from the shareholders for their shares. Thus, the shareholders paid $1,000 cash per share.
Peacn Inc. has the following transactions for the year.
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Revenues
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$1,000,000
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Salary Expense
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$125,000
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Technology Lease Expense
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$350,000
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Consulting Fees Expense
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$75,000
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Net Short Term Capital Gain
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$100,000
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Charitable Contribution
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$25,000
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Total Cash Distributions to
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Shareholders
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$80,000
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Required -
1. Compute the total ordinary income for Peacn Inc.
2. Compute the separately stated items for Pecan Inc.
3. Compute Monica's share of the ordinary income.
4. Compute Monica's share of the separately state items.
5. Compute Monica's year end tax cost (basis) in her shares.