Reference no: EM133149267

Questions -

Q1. At a time when Emily's basis in her partnership interest is $54,000 she receives a distribution which does not reduce her percentage of ownership in the partnership. The distribution consists of the following assets:

	Basis to Partnership	Fair Market Value
Cash	$45,000	$45,000
Inventory	$15,000	$25,000
Office Furniture	$30,000	$24,000

What gain or loss, if any, does Emily report as a result of the distribution

What basis does Emily take in the cash she receives?

What basis does Emily take in the Inventory she receives?

What basis does Emily take in the Office Furniture she receives?

2. Three owners join together to form ABC, INC., which properly elects to be taxed as a C corporation. Shareholder A contributes cash of $10,000 and a collection of jewelry display cases to be placed in the jewelry store operated by the C corporation. The jewelry display cases have a basis in A's hands of $112,000, and a fair market value of $81,000. B contributes $10,000 in cash and jewelry inventory having a basis in B's hands of $35,000 and a fair market value of $81,000. C contributes inventory having a basis in C's hands of $120,000 and a fair market value of $96,000. Since each of the three of them have agreed to be equal shareholders, it was determined that it was fair to distributed $5,000 in cash to Shareholder C because her initial contribution had a fair market value of $5,000 more than the contribution of either A or B.

What gain or loss is recognized by ABC, Inc., as a result of the contribution transactions by its three initial shareholders?

How much gain or loss is recognized by A as a result of her contribution?

What is the balance in A's capital account immediately following her contribution?

How much gain or loss does B recognize as a result of his contribution?

What is the balance in B's capital account immediately following his contribution?

How much gain or loss does C recognize as a result of her contribution?

What is the Basis of C's capital account immediately following the contribution?

Q3. You are starting a new business and have been advised that a corporation helps protect your personal assets from the risk of the business. You have also heard that there are certain situations in which the limited liability protection may not be available to owners of a C corporation. Please describe three events that occasionally happen inside of a C corporation which limits or completely eliminates the limited liability protection?

Q4. As we discussed in class, various entities can qualify to file a partnership return. Provide complete list of all entities that can be formed under the laws of the State of Utah which are eligible to make the check the box election to file a partnership tax return.

Q5. When an entity properly elects to file as a sole proprietorship, most items of income and expense are reported on a Schedule C, E, or F on the 1040 of the sole proprietor. However, not all items are properly reported on these three schedules. List three items of income or expense that should be reported on different schedules of the sole proprietor and indicate which schedule on which these items are properly reported.