Reference no: EM132663233
Problem - Mike and Melissa want to form the equal MM Partnership. Melissa will contribute cash of $140,000. Mike has cash of $40,000 and land (fair market value of $100,000, adjusted basis of $136,000). Mike purchased the land several years ago as an investment (capital) asset. Mike and MM LLC are trying to decide between two alternatives.
In Alternative 1, Mike will contribute the land to the LLC. MM will use the property as a § 1231 asset (a parking lot) and then sell it in six years at an estimated $100,000 price. (Disregard any potential improvements to the land.)
In Alternative 2, Mike will sell the land immediately to a third party and contribute to MM the $100,000 cash proceeds from the sale. MM will use that cash to purchase similar land for $100,000 (also to be used as a parking lot).
Use the following additional assumptions: (1) neither Mike nor MM will realize other capital or § 1231 gains or losses now or in the future, (2) Mike's marginal tax rate is 35%, (3) a reasonable annual discount rate is 3%, and (4) the tax treatment of capital and § 1231 gains and losses does not change in the foreseeable future.
Required -
a. For each alternative, when would the $36,000 loss be recognized, to whom would the loss be allocated, what is the character of the loss, and over what time period can the loss be deducted?
b. In these two alternatives, calculate Mike's tax savings each year from deducting his share of any loss allocated to him that year. Use the tables in Appendix G (or Microsoft Excel) to calculate the present value of these savings. Considering only tax savings, as Mike's tax adviser, would you recommend Alternative 1 or Alternative 2? Why? What other issues should Mike consider?
c. How would the results in parts (a) and (b) change if MM were to sell the property in Alternative 1 after only four years? Answer conceptually; do not make calculations.
Explain the groups processes and stage of formation
: Explain the group's processes and stage of formation. Explain curative factors that occurred in the group. Include how these factors might impact client.
|
How much gain or income will Sam recognize
: How much gain or income will Sam recognize on his contribution of the land to the LLC? What is the character of any gain or income recognized
|
Construct stockholders equity section of balance sheeet
: Construct the stockholders' equity section of the balance sheet at the end of the year. (Amounts to be deducted should be indicated with a minus sign.)
|
Identify current description of data-driven DSS
: For this task, you will identify a current description of a data-driven DSS, such as those described in the readings for this week.
|
What is the character of the loss
: For each alternative, when would the $36,000 loss be recognized, to whom would the loss be allocated, what is the character of the loss
|
Find what is the current yield of the bond
: What is the current yield of the bond? What is the price of the bond,An annual bond has a face value of $10,000, a coupon rate of 4.8%, a yield to maturity?
|
Supply chain industry is picking up enterprise blockchain
: Supply chain industry is picking up enterprise blockchain at fast pace. What security measures should be taken while adding new members in blockchain network.
|
What education will you provide to the patient
: A 35-year-old comes to the clinic. He states, "It's getting close to allergy season and I need something to keep me from getting sick. Last year the doc gave.
|
Organization cloud computing implementation
: Write a paper describing your chosen organization's Cloud Computing implementation and the benefits they realized from the implementation.
|