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1.Tom has $ 5.2 million of property that he wants to leave to his four children. He is considering making a current gift of the property (rather than leaving the property to pass through his will). Tom has made many prior taxable gifts and additional taxable transfers will be subject to the highest transfer tax rate. Determine how much estate tax tom will save if he gifts the property now and survives at least three years, during which time the property appreciates to $5.84 million? Ignore the time value of money in your calculation.

2.On January 1, X9, Waldo received his 50% profits and capital interest in High Air, LLC in exchange for $2,030 in cash and real property with a $3,030 tax basis secured by a $2,030 nonrecourse mortgage. High Air reported a $15,030 loss for its X9 calendar year. How much loss can Waldo deduct, and how much loss must he suspend if he only applies the tax basis loss limitation?

3. Eve transferred $2.18 million of real estate into an irrevocable trust for her son, Garcia. The trustee was directed to retain income until Luis' 21st birthday and then pay him the corpus of the trust. Eve retained the power to require the trustee to pay income to Garcia at any time, and the right to the assets if Garcia predeceased her. What amount of the trust, if any, will be included in Eve's estate if she died shortly after making the transfer?

4. Jacob is a 40% owner of MB Partnership. Marty has decided to sell his interest in the business to Waldo for $110,000 cash plus the assumption of his share of MB's liabilities. Assume Jacob's inside and outside basis in MB are equal. MB shows the following balance sheet as of the sale date:

What is the amount and character of Jacob's recognized gain or loss?

5. Sweetwater Corporation declared a stock dividend to all common stock shareholders of record on December 31, 20X3. Shareholders will receive 1 share of Sweetwater common stock for each 5 shares of common stock they already own. Pierre Dorgan owns 500 shares of Sweetwater common stock with a tax basis of $150 per share. The fair market value of the Sweetwater common stock was $95 per share on December 31. What is Pierre's income tax basis per share in his new and existing common stock in Sweetwater, assuming the distribution is non-taxable?

6. Ashley received a 1/3 profits and capital interest in Bright Line, LLC in exchange for legal services she provided. In addition to her share of partnership profits or losses, she receives a $22,000 guaranteed payment each year for ongoing services she provides to the LLC. For X4, Bright Line reported the following revenues and expenses: Sales - $142,000 Cost of Goods Sold - $82,000, Depreciation Expense - $41,000, Long-Term Capital Gains - $7,000, Qualified Dividends - $5,200, and Municipal Bond Interest - $3,200. How much ordinary business income (loss) will Bright Line allocate to ashley on her Schedule K-1 for X4?

7. Tom and Meeks decide to liquidate their jointly owned corporation, Pennsylvania Corporation. After liquidating its remaining inventory and paying off its remaining liabilities, Pennsylvania had the following tax accounting balance sheet.

Under the terms of the agreement, Tom will receive the $262,000 cash in exchange for his 40 percent interest in Pennsylvania. Tom's tax basis in his Pennsylvania stock is $53,500. Meeks will receive the building and land in exchange for her 60 percent interest in Pennsylvania. Her tax basis in the Pennsylvania stock is $107,000.

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A.What amount of gain or loss does Pennsylvania recognize in the complete liquidation?

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B.What amount of gain or loss does Tom recognize in the complete liquidation?

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C.What amount of gain or loss does Meeks recognize in the complete liquidation and what is her tax basis in the building and land after the complete liquidation?

8. alpine Company is owned equally by Bobby and his sister Sam, each of whom own 1,000 shares in the company. On December 31, 20X3, alpine redeemed 200 of Sam's shares for $5,000,000 in a transaction treated as an exchange by Sam. alpine has current E&P of $10,000,000 and accumulated E&P of $30,000,000 (computed without regard to the stock redemption). Assuming alpine did not make any dividend distributions during 20X3, by what amount does the company reduce its E&P because of the redemption?

9. Kim is a 25% partner in the KDP Partnership and receives a parcel of land with a fair value of $151,000 (inside basis of $102,000) in complete liquidation of her partnership interest. Kim's outside basis immediately before the distribution is $201,000. KDP currently has a §754 election in effect and has no hot assets or liabilities. What is KDP's special basis adjustment from the distribution?

10. At her death Sierra owned real estate worth $270,000 that was titled with her sister in joint tenancy with the right of survivorship. Siena contributed $43,300 to the total cost of the property and her sister contributed the remaining $80,500. What amount, if any, is included in Sierra's gross estate?

11. This year, Reggie's distributive share from Almonte Partnership includes $24,000 of interest income, $20,000 of dividend income, and $76,000 ordinary business income.

A. Assume that Reggie materially participates in the partnership. How much of his distributive share from Almonte Partnership is potentially subject to the Medicare contribution tax?

B. Assume that Reggie does not materially participate in the partnership. How much of his distributive share from Almonte Partnership is potentially subject to the Medicare contribution tax?

12. Mary transferred $472,000 to a trust with directions to pay income to her spouse, William, for his life. After William's death the corpus of the trust will pass to William's son. If the life estate is valued at $73,200, what is the total amount of the taxable gifts?

13. Daniela is a 25% partner in the JRD Partnership. On January 1, JRD distributes $25,000 cash, inventory with a $19,600 fair value (inside basis $9,800), and accounts receivable with a fair value of $12,500 (inside basis of $0) to Daniela. JRD has no liabilities at the date of the distribution. Daniela's basis in JRD is $31,000. What is Daniela's basis in the distributed inventory and accounts receivable?

14. Julian transferred 100 percent of his stock in Lemon Company to Apricot Corporation in a Type B stock-for stock exchange. In exchange, he received stock in Apricot with a fair market value of $375,000. Julian's tax basis in the Lemon stock was $750,000. What amount of loss does Julian recognize in the exchange and what is his basis in the Apricot stock he receives?

15. Berry, Inc., a U.S. corporation, received the following sources of income during 2015:
$16,600 interest income from a loan to its 100 percent owned Swiss subsidiary
$53,200 dividend income from its 100 percent owned French subsidiary
$101,300 royalty income from its Bermuda subsidiary for use of a trademark outside the United States
$25,550 rent income from its Canadian subsidiary for use of a warehouse located in New Jersey
$50,550 capital gain from sale of stock in its 40 percent owned Japanese joint venture. Title passed in Japan.
What amount of foreign source income does berry have in 2015?

16. Moto Corporation reported taxable income of $400,000 from operations for 20X3. The company paid federal income taxes of $136,000 on this taxable income. During the year, the company made a distribution of land to its sole shareholder, Emmet Jugg. The land's fair market value was $50,000 and its tax and E&P basis to Otter was $30,000. Emmet assumed a mortgage attached to the land of $10,000. Any gain from the distribution will be taxed at 34%. The company had accumulated E&P of $900,000 at the beginning of the year. Compute moto's total taxable income and federal income tax paid because of the distribution (assume a tax rate of 34%). Using your solution, compute moto's current E&P for 20X3.

17. On March 15, 20X9, Trump, Peter, and Sarah formed Picture Perfect General Partnership. This partnership was created to sell a variety of cameras, picture frames, and other photography accessories. The following items were contributed by each partner in exchange for a 1/3 capital and profits interest:

• Trump- cash of $3,300, inventory with a FMV and tax basis $5,300, and a building with a FMV of $8,300 and adjusted basis of $10,300. Additionally, the building is secured by a $10,300 mortgage.

• Peter - cash of $5,300, accounts payable with a FMV and tax basis of $19,300, and land with a FMV and tax basis of $20,300.

• Sarah - cash of $2,300, accounts receivable with a FMV and tax basis of $1,300, and equipment with a FMV of $26,300 and adjusted basis of $4,300. Also, the equipment is secured by a $23,300 note payable.

What is the partnership's inside basis in each asset? How much gain or loss must Picture Perfect recognize? Prepare Picture Perfect's balance sheet reflecting the partners' capital accounts on both a tax basis and 704(b)/FMV basis.

18. Dark Partnership had the following revenues, expenses, gains, losses, and distributions:

Given these items, what is Dark's ordinary business income (loss) for the year?

19. Tom, a limited partner of Candy Apple, LP, is allocated $20,400 of ordinary business loss from the partnership. Before the loss allocation, his tax basis is $16,400 and at-risk amount is $6,400. tom also has ordinary business income of $16,400 from Sweet Pea, LP as a general partner and ordinary business income of $6,200 from Red Tomato, as a limited partner. How much of the $20,400 loss from Candy Apple can tom deduct currently?

20. Billy is married and wants to transfer the maximum amount of cash to each of his four children and six grandchildren. How much in total can BILLY transfer to his children and grandchildren each year without triggering any taxable gifts?

21. Jose and Dave purchased real property for $550,000 as equal tenants in common. Although they are listed as equal co-owners, Jose was only able to provide $220,000 of the purchase price. Dave treated the additional $110,000 of his contribution to the purchase price as a gift to Jose If the property is worth $3 million at Jose's death, what amount would be included in Jose's estate?

22. bank is a single individual who possesses a life insurance policy worth $346,000 that will pay his two children a total of $1,030,000 upon his death. This year bank transferred the policy and all incidents of ownership to an irrevocable trust that pays income annually to his two children for 15 years and then distributes the corpus to the children in equal shares.Reference the tax rate schedule in Exhibit 25-1 and the Unified Credit schedule in Exhibit 25-2 to answer this problem. (Enter your answers in dollars not in millions.)

a. Calculate the amount of gift tax due (if any) on the gift. Assume that bank has made only one prior taxable gift of $5 million in 2011. (Leave no answer blank. Enter zero if applicable.)

b. Calculate the amount of cumulative taxable transfers for estate tax purposes if bank dies this year but after the date of the gift. At the time of his death, bank's probate estate is $10.2 million and it is to be divided in equal shares between his two children.

23. May Corporation is a 100 percent owned Spanish subsidiary of Doubloon Corporation, a U.S. corporation. May had post-1986 earnings and profits of €5,200,000 and post-1986 foreign taxes of $3,200,000. During the current year, May paid a dividend of €2,600,000 to Doubloon. Assume an exchange rate of €1 = $1.50. Compute the tax consequences to Doubloon as a result of this dividend.

24. Clamp, Inc. has been an S corporation since its inception. On July 15, 2016, Clamp, Inc. distributed $49,000 to J. D. His basis in his Clamp, Inc. stock on January 1, 2016, was $47,000. For 2016, J. D. was allocated $12,000 of ordinary income from Clamp, Inc. and no separately stated items. What is J.D.'s basis in his Clamp, Inc. stock after all transactions in 2016?

25. tamy transfers property with a tax basis of $1,120 and a fair market value of $810 to a corporation in exchange for stock with a fair market value of $620 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $190 on the property transferred. What is tamy's tax basis in the stock received in the exchange?

26. Anthony acquires a 30% interest in the PPZ Partnership from Pola, an existing partner for $45,000 of cash. The PPZ Partnership includes $16,000 of recourse liabilities. What is Anthony's basis in his partnership interest?

27. Mary owns 60 percent of the stock of Lea Corporation. Unrelated individuals own the remaining 40 percent. For a stock redemption of Marys's stock to be treated as an exchange under the "substantially disproportionate" test, what percentage of Lea stock must Mary own after the redemption?

28. Nike Corporation is owned equally by Sven and his wife Olga, each of whom hold 100 shares in the company. nike redeemed 75 shares of Sven's stock for $2,000 per share on December 31, 20X3. nike has total E&P of $500,000. What are the tax consequences to nike because of the stock redemption?

29. Boss, Incorporated manufactures sandals and distributes them across the southwestern United States. Assume that Boss has sales and use tax nexus in Arizona, California, Colorado, New Mexico, and Texas. Boss has sales as follows:

Assume the following sales tax rates: Arizona (6 percent), California (8 percent), Colorado (7 percent), New Mexico (6.5 percent), Oregon (7.25 percent), Texas (8 percent), and Utah (5 percent). What is Boss's total sales and use tax liability? (Round your interim calculations to the nearest whole number)