Reference no: EM132307343

Question: 1) Solis Corp. is a manufacturing corporation. The cash generated by the manufacturing business is invested in to the real estate development. Solis Corp. wants to reduce the risk in the real estate business and thinks of incorporating a 100% owned new subsidiary and transfer all real estate business under the new sub. This transaction qualifies as what type of reorganization? Please justify your answer.

a) a) Type A
b) Type B
c) Type C
d) Type D

Question: 2) Barkley Inc, a U.S. parent, operates an unincorporated branch in Russia. On its U.S. tax return, Barkley Inc. reports $900,000 of taxable income from Russian branch and $2 million of taxable income from its U.S. operations. Barkley Inc. paid $100,000 of Russian taxes related to its branch operation in Russia. Calculate Barkley Inc.'s U.S. tax liability assuming 21% flat tax rate and taking foreign tax credit benefit under Section 901. Please show calculations.

Question: 3) Assume all 20 Students in Income Tax II Class at Metro join hands and form an S Corporation named "Taxes R US" in year 2018 and contribute $10,000 each. Assume there are no non-resident aliens in this corporation. In the year 2018, Rawia and Tsega, starts taking distributions of $15,000 each without receiving any compensation. Both these shareholders devote almost 100% of their time to this business. Please describe in detail, the tax implications on this distribution to the company and to the shareholders. Assume the business made money and has positive E&P.

Question: 4) Lizzett starts the new business and she needs your help. She thinks she "pays too much in taxes". She needs limited liability protection for her business but also does not want to spend too much time in incorporation and administrative expenses. She has no business partner and her husband helps her in the business. She thinks she may need capital in the future and therefore an additional business partner may be needed. She estimates that she could make about $25,000,000 in revenue and about $1,000,000 in profits during the first year. Lizzett keeps no inventory. Lizzett also heard from her friend- Maria, who is a student at Metro, that there are some new deductions/benefits for small business. Please advise Lizzett for structuring her business.

Question: 5). Marquis, a shareholder bought 10,000 shares of Jones Corporation for $50,000 several years ago. When the stock is valued at $90,000, Jones Corporation redeems the shares in exchange for 5,000 shares of Smith Corporation stock and a $10,000 Smith's bond. Assume the transaction meets the requirements of §368. Which of the following statements is false regarding this transaction? Please explain your reasoning.
a. Marquis has a realized gain of $40,000.
b. Marquis has a postponed gain of $30,000.
c. Marquis has a basis in the Smith Corp. stock of $70,000.
d. Marquis has a recognized gain of $10,000.

Question: 6) Tinsae Corp. has made S - election on the date of its incorporation in year 2012. For the year 2017, Tinsae has a gross receipt for the year totaling $350,000 of which $100,000 is passive investment income. Expenditures directly connected to the production of the passive income total $35,000. Calculate Tinsae Corp.'s passive investment income tax (assume the tax rate 21%). Please show your calculations.

Question: 7) Steven, a U.S. Citizen, is a sole shareholder of S corporation, named "Snow Machine Tool Company". He has $5,000 basis in stock. Steven also loaned money to S Corporation and has basis of $3,000. Assume no AEP, calendar year and beginning balance of AAA and OAA accounts are zero. The Corp. made $10,000 in the ordinary income which was reported on Steven's K-1. Corp. also received a tax- free interest income of $4,000 which was also reported on K-1. Steven took a distribution of $21,000 during the year from the S corporation. Please calculate the year-end balances in AAA account, OAA Account, Steven's stock basis and loan basis showing the effects of the distribution. Please show your calculations.

Question: 8) Jordan purchased his partnership interest from Salat on the first day of the current year for $40,000 cash. Nick and Brian are also partner in this business. Jordan received a $10,000 cash distribution from the partnership during the year, and his share of partnership income is $15,000. His share of partnership liabilities on the last day of the partnership year is $20,000. Jordan's outside basis for his partnership interest at the end of the year is $______. Please show your calculations.

Question: 9) Lindsey and Saeedeh formed an equal profit- sharing "S&L Partnership" during the current year, with Lindsey contributing $100,000 in cash and Saeedeh contributing land (basis of $60,000, fair market value of $40,000) and equipment (basis of $0, fair market value of $60,000). What are Saeedeh's outside basis in the S&L partnership interest? Does any partner recognize gain/loss on this transaction? Please explain in detail giving reasons.

Question: 10) On July 1st, 2019, Bryan, and Brian incorporates a partnership called B&B Financial Management, LLC to undertake business as a broker in the stock market. The organizational expenses, lawyer's fees etc comes to $150,000. How much can B&B deduct on if first year return ending 12/31/2019?

Question: 11) Jenna contributes property valued at $50,000 (basis of $40,000) in exchange for a 25% interest in the J&J L.L.C. - a Partnership. The balance 75% is owned by Juan. If the property is later sold for $70,000, how much of total gain will be allocated to Jenna. How much gain will be allocated to Juan? Please show calculations.

Question: 12) Bethel, a nonresident alien, realizes a gain on the sale of commercial real estate located in Denver, Colorado. The real estate was sold to Ibrahim, Bethel's cousin who is also a nonresident alien. Bethel recognizes this as a foreign-source income from the sale because her home country is not the U.S. Bethel thinks this income is not taxable in the U.S. Please advise Bethel and explain in detail giving reasons.

Question: 13) "Losses R US" a C-Corporation joined the "Team Corporation's" Consolidated Federal Income Tax Return group, when Losses R Us held a $1 million NOL carryforward. In its first year as a part of the Team Corporation group, Losses R Us generated a $150,000 taxable loss. For that year, Team Corporation is thinking of deducting all of Losses R Us' NOL in computing consolidated taxable income. Is it allowed under the federal tax laws? Please explain in detail giving reasons. (Assume no 382 limitations apply to this case.)

Question: 14) Cowan, Inc, a calendar year parent corp. acquired all the stock of Monica Corp. on January 1, 2013, for $1,000,000. The parties immediately elected to file consolidated income tax returns. Monica Corp. generated taxable income of $250,000 for 2013 and paid a dividend of $100,000 to Cowan. In 2014, Monica Corp. generated an operating loss of $350,000, and in 2015 it produced taxable income of $750,000. As on the last day of 2015, what was Cowan's basis in the stock of Monica Corp? Please show your calculations.

a. $1,650,000.
b. $1,550,000.
c. $1,000,000.
d. $0.

Question: 15) Nickolas, is a 45% owner of a calendar year S corporation name "Cook Corporation" during 2018. His beginning stock basis is $230,000, and Cook corporation reports the following items.

Please calculate Nickolas' stock basis at year-ended 2018.

Question: 16) Collins Corp. is a U.S. corporation. The company wants to expand its business in South America. The CFO-Nathan, has requested you to research, if following countries has a tax treaty with the United States:

a) Brazil
b) Mexico
c) Argentina

Please prepare a short paragraph answer for these three countries, research if these countries tax dividends, interest, and royalties paid back to the Collins Corp. (Hint: Use IRS.gov website and search for country specific treaties.)

Question: 17) Danielle and Steven wants to incorporate a partnership and start a business. They just learned from the Income Tax II class that a partnership is a flexible way to do a business. They have some money but wants to float an Initial public offering (IPO) and have this large partnership listed on the NASDAQ stock exchange. Please advise them on the following tax issues:

a) Basis to them of the partnership interest, holding period.
b) Agreements and incorporating the entity.
c) Organization and start-up costs and Syndication cost.
d) Choice of the taxable year.
e) Guaranteed payments to be made to Danielle.

Question: 18) Jennifer's outside basis in the partnership is $50,000 and she receives cash of $20,000 from the partnership upon complete proportionate liquidation. She also receives some inventory, basis $10,000, (FMV of $15,000). Jennifer loved the receptionist desk used for the business and she manages to get the desk as well upon the liquidation. The partnership's adjusted basis in the desk is $200.

a) How much capital loss, would Jennifer recognize on her tax return because of the liquidation?
b) How much basis she will have in the inventory and the desk?

Question: 19) Miramontes Corp. is a multinational U.S. company. deriving royalty income from worldwide operations. During the year, Miramontes received $100 million in royalty for use of its technology from China. Is this royalty income "U.S. Source" or "foreign source"?

Question :20) Kevin forms Kelly Corp. (C corp.) to manufacture and sell machine parts. Kevin obtains loan from "Your kind neighborhood Bank" for $ 1million @ 10%. Kelly Corp's debt equity ratio is 4:1. For the year ended 12/31/2019, Kevin expects the business to generate NPBIT (Net Profit before Interest and Tax) of $200,000. How much of bank interest is deductible on the tax return of Kelly Corp. for year 2019? Assume no other interest income for the business.