What effect does the distribution have on abel

Reference no: EM131287722

Advanced Income Tax - Corporate project

Abel, Baker and Cane decided to form the ABC Corporation. They contributed the following assets on Jan 1, 2015.

Abel contributed cash of $37,000 and some land which cost him $32000 and had a fair market value of $50000. The land had a mortgage attached of $12000 which was assumed by the corporation.

Baker contributed services which were valued at $30,000 and some equipment which cost $52,000 but had a fair market value of $45000.

Cane contributed inventory which had a fair market value of $58000 and had a cost basis of $23000 to Cane. He also contributed tools which had a basis of $28000 and fair market value of $24,000.

Each shareholder received 100 shares of stock except Cane who also received $7000 of cash.

The corporation started operations on January 1, 2005. The results of the year ended December 31, 2015 were as follows:

Book income

Sales $750000

Cost of Sales 485000

Salary expense 125000

Rent expense 32000

Utility expense 14250

Depreciation expense 43000

Interest expense 17500

Meal expense 11300

Insurance expense 8400

Capital gains 19700

Capital losses 14800

Charitable contributions 15400

Interest income 33000

Dividend income 47900

Maintenance expense 9400

Fines 6100

Tax depreciation consisted of a $12000 179 expense deduction and $24000 of regular depreciation using the half year convention. The interest expense included $4500 of interest on loans to buy the tax exempt securities. The insurance expense included $1500 of premiums to purchase key man life insurance. Of the $33000 of interest income $18200 was from tax exempt bonds. All of the dividend income came from corporations which ABC had less than a 10% stake. $1400 of dividend income came from a foreign corporation.
During 2015 ABC made the following distributions to the shareholders.

Abel received cash of $7000 and section 1231 property which had a basis of $4000 and a fair market value of $11000.

Baker received a parcel of land which cost $32000 but had a fair market value of $37000. Attached to the land was a mortgage of $19000 assumed by Baker.

Cane received cash of $18000.

At the beginning of 2015 ABC had accumulated earnings and profits of $13000.

From the above information answer the following questions. You must put your answers underneath each question on this form. If you do not put your answers on this form, you will not receive credit. You must show your computations to receive credit. You may attach an Excel spreadsheet to show your computations.

1. For Abel how much is realized gain?
How much is recognized gain?
How much is his basis in the stock?
For Baker how much is realized gain?
How much is recognized gain?
How much is his basis in the stock?
For Cane how much is realized gain?
How much is recognized gain?
How much is his basis in the stock?

2. How much taxable income did the ABC Corporation have during 2015?

3. How much is ABC's income tax?

4. How much is the current earnings and profit for ABC for the year 2015?

5. What effect does the distribution have on Abel? Is it a dividend, return of capital or capital gain and how much?

6. What effect does the distribution have on Baker? Is it a dividend, return of capital or capital gain and how much?

7. What effect does the distribution have on Cane? Is it a dividend, return of capital or capital gain and how much?

8. What effect do the distributions have upon ABC's earnings and profit? What is the amount of earnings and profit at the end of 2015?

This is advanced income taxes 2016 and need answers

Reference no: EM131287722

Questions Cloud

Discuss about the juvenile law : Discuss about the JUVENILE LAW The research paper will be due the class day before the final exam. It will be a 3-4 page double-spaced, correctly formatted paper.,

What is average cost to maps for each person with a ticket : How many people would need to attend in order for MAPS to break even? If MAPS SELLS 100 tickets for the dinner, what is the average cost to MAPS for each person with a ticket?

Write annotated bibliography in apa format : Write annotated bibliography in APA format for the list references in the attached file below.- Given the link has a sample of annotated bibliography.

Relative price of consumer electronics in china : Furthermore, assume that Germany has an absolute advantage in producing both goods, and a comparative ad- vantage in producing machine tools. In the framework of the Heckscher- Ohlin model discuss the welfare effects of a drop in the relative pric..

What effect does the distribution have on abel : ACC 208 Advanced Income Tax How much is ABC's income tax and How much is the current earnings and profit for ABC for the year 2015 - What effect does the distribution have on Abel? Is it a dividend, return of capital or capital gain and how much?

What would be the difficulties associated with any or both : Are there any differences between estimating and forecasting the short-run variables and the long-run variables? What would be the difficulties associated with any or both?

What are some examples of commonly used jargon : What are some examples of commonly used jargon, slang, or colloquialisms that most annoy you in written communication? Why? What strategies do you use to revise your written work?

Calculate the marginal cost for each firm in the industry : What would be the market price for the product and the equilibrium output for the industry?

Explain how your preferred policy would affect you personal : Discuss the potential costs and benefits of your preferred policy. Be sure to identify who bears the costs and who reaps the benefits. Explain how your personal values and principles influence what you classify as a cost or benefit and how you ass..

User Account

All Pages