Bob and Joan incorporate their partnership and elect to be taxed as an S Corporation. At the
Question:
Bob and Joan incorporate their partnership and elect to be taxed as an S Corporation. At the time of incorporation, the partnership owned contributed securities with a basis of $10,000 and a fair market value of $15,000. Two years later the S Corporation sold the securities for $18,000.
Which of the following statements about the tax effects of these facts is false?
Question options:
The total stock basis of the shareholders is increased by $8,000 as a result of the securities sale. | |
The shareholders are taxed on $8,000 of income as a result of the sale | |
The S corporation is subject to an entity level built-in gains tax on $5,000 as a result of this sale |
Business Law Text and Cases
ISBN: 978-0324655223
11th Edition
Authors: Kenneth W. Clarkson, Roger LeRoy Miller, Gaylord A. Jentz, F