Reference no: EM133029058
Question - Facts: P and S are both U.S. corporations classified as "C" corporations for federal income tax purposes. P owns 100% of S's stock. However, P and S do not file their federal income tax returns as a consolidated group (they file as separate corporations).
To fund its operations, four years ago S borrowed $500,000 from P. The transaction was structured with five payments of $100,000 plus market interest. S has been making the required payments of interest and principal on the debt, and the amount outstanding is now $100,000. Also, P's basis in the outstanding note receivable from S is $100,000.
Although S is solvent (i.e., the fair market value of its assets is just barely in excess of its debts), it is experiencing cash flow problems and is now unable to repay the debt. Accordingly, S proposes to issue additional S stock to P in satisfaction of the debt. The fair value of this additional stock would be $5,000.
S has determined that Code section 108(e) is the authority that governs the taxation of its proposed transaction.
Issues:
1) What are the tax consequences to S of the proposed transaction?
2) If the transaction could be treated as a capital contribution (instead of a stock issuance), what would be the tax consequences to S?
3) Is it possible for S to characterize the issuance as a capital contribution?
|
What rate of return is the buyer expecting to make
: Denise is 55 years old and wants her money now. She has been offered $23,937,093 to sell her ticket. What rate of return is the buyer expecting to make
|
|
Determine depreciation expense for the years
: On January 1, 2022, Muzzy Company purchased a tractor-trailer for $102,000. Using the above data, determine depreciation expense for the years
|
|
Avoiding the kinds of malfunctions
: Select a well-known company (one of which all your classmates would have heard) that produces a product (not a service). Based on your reading for this week, re
|
|
Benefits influences employee behaviour
: Discuss how the value of benefits influences employee behaviour.
|
|
What would be the tax consequences to S
: If the transaction could be treated as a capital contribution (instead of a stock issuance), what would be the tax consequences to S
|
|
At what amount will Castille record the land
: A recent tax appraisal of the property allocated $100,000 to the land and $400,000 to the building. At what amount will Castille record the land on the June
|
|
Differences between dismissal and discharge
: What are the differences between dismissal and discharge? What is a constructive discharge? Provide an example of a constructive discharge.
|
|
What is meant by the periodic return measure Total Return
: Question - What is meant by the periodic return measure Total Return? What are its components, and how is it useful to analyze them
|
|
Develop to maintain a cordial environment
: If you were the owner of a company and a union was formed, what strategies would you develop to maintain a cordial environment and good communication for the be
|