Questions and Answers of Federal Taxation 2021 Corporations Partnerships Es

In December 2017, Jody transferred stock having an $8,114,000 FMV to her daughter Joan. Jody paid $1,044,000 ($3,185,800 2 $2,141,800) of gift taxes on this transfer. When Jody died in January 2020,
Val died on May 13, 2020. On July 3, 2017, she gave a $400,000 life insurance policy on her own life to son Ray. Because the value of the policy was relatively low, the transfer did not cause any
Sue died on May 3, 2020. On October 1, 2017, Sue gave her son Tom land valued at $7,014,000. Sue applied a unified credit of $2,141,800 against the gift tax due on this transfer. On Sue’s date of
Mary died on April 3, 2020. As of this date, Mary’s gross estate was valued at $16.5 million. On October 3, Mary’s gross estate was valued at $15.8 million. The estate neither distributed nor
Beth died on May 3, 2020. Her executor elected date-of-death valuation. Beth’s gross estate included, among other properties, the items listed below. What is the estate tax value of each item?a.
Jeung Hong, a widower, died in March 2020. His gross estate was $14.5 million and, at the time of his death, he owed debts of $60,000. His will made a bequest of $200,000 to his undergraduate alma
Annie James died early in 2020. All her property passed subject to her will, which provides that her surviving husband, Dave James, is to receive all the property outright. Her will further states
Marcello Martino, who is single and very wealthy, is considering making his first taxable gifts in the current year. These gifts would approximate $10 million. Because the current large unified
On August 3, 2017 Ginger Grayson, a widow, transferred $55,000 to each of two Sec. 529 plans (qualified tuition programs), one for grandson Greg Grayson and one for granddaughter Gayle Grayson. Her
Janet Mason timely filed a 2018 gift tax return to report the gift on June 3, 2018, of closely held stock in Mason Meat Co., Inc. The tax return, which your firm prepared, reflected a value of $1,500
Your manager advises you that clients Mike and Winona Marsh, residents of Bath, Maine, acquired beachfront property in Maine in 2002 and titled the property in their names as joint tenants with right
Morris Jory, a long-time tax client of the firm that employs you, has made substantial gifts during his lifetime. Mr. Jory transferred Jory Corporation stock to 14 donees in December 2019. Each donee
Ned Norris, a widower, engaged in the transactions described below during 2019. He made only one earlier taxable gift, $1.2 million in 2014. Use this information to prepare a 2019 gift tax return
Use the information shown below to prepare a 2019 gift tax return (Form 709) for Joel Bruton. Pages 4 and 5 of the form are not applicable. Joel and his wife Janis, both U.S. citizens, want to elect
Stuart Scroggins died in June of the current year. Among the provisions in his will is one that benefits your client, Samantha Scroggins Valdez. This provision reads as follows:I leave $1.5 million
George and Martha, spouses who are both age 60 and in excellent health, made a number of gifts during 2020. Their accountant is trying to help them decide whether to elect gift splitting. If they do
In March 2020, Ginger Graham, age 46 and wife of Greg Graham, engaged in the transactions described below. Determine Ginger’s gift tax liability for 2020 if she and Greg elect gift splitting and
Siu is considering giving her son stock in Ace Corporation or Gold Corporation. Each has a current FMV of $500,000, and each has the same estimated future appreciation rate. Siu’s basis in the Ace
In June 2019, Karen transferred property with a $75,000 FMV and a $20,000 adjusted basis to Hal, her husband. Hal dies in March 2020; the property has appreciated to $85,000 in value by then. His
In 2020, Henry and his wife, Wendy, made the gifts shown below. All gifts are of present interests. What is Wendy’s gift tax payable for 2020 if the couple elects gift splitting and Wendy’s
In 2020, Homer and his wife, Wilma (residents of a non– community property state) make the gifts listed below. Homer’s previous taxable gifts consist of $100,000 made in 1975 and $1.4 million
In the current year, Louise makes the transfers described below to Lance, her husband, age 47. Assume 4% is the applicable interest rate. What is the amount of her marital deduction, if any,
In earlier years, neither Hugo nor Wanda, his wife, made any taxable gifts. In 2019, Hugo gave $15,000 cash to each of his nieces, nephews, and grandchildren, 30 individuals in total. In 2020, Wanda
During 2020, Will gives $40,000 cash to Will, Jr. and a remainder interest in a few acres of land to his friend Suzy. The remainder interest is valued at $32,000. Will and his wife, Helen, elect gift
In March 1976, Sue made a taxable gift of $200,000. In arriving at the amount of her taxable gift, Sue elected to deduct the $30,000 specific exemption then available. In 2020, Sue makes her next
In March 2020, Marge (age 67) engages in the following transactions. Determine the amount of the completed gift, if any, arising from each of the following events. Assume 4% is the applicable
Refer to the facts of Problem C:12-36 and assume the current year is 2020. Emily’s prior gifts are as follows:Year . . . . . . . . . . . . . . . . Amount of Taxable Gifts1974 . . . . . . . . . . .
Yolanda and Xavier, spouses, have four adult children, Andy, Betty, Cathy, and Danny. In the current year, they made a number of gifts. Yolanda gave Andy cash of $40,000 and Betty stock valued at
Amir made taxable gifts as follows: $800,000 in 1975, $1.2 million in 1999, and $600,000 in 2020. What is Amir’s gift tax liability for 2020?
In 2020, Sondra makes taxable gifts aggregating $300,000. Her only other taxable gifts amount to $200,000, all of which she made in 1997.a. What is Sondra’s 2020 gift tax liability?b. What is her
In 2008, Frank made an installment sale of real property to Stu, his son, for $1 million with payments due over a 10-year period. Frank did not file a gift tax return. For 2017, Frank reported
Phil and Marcy have been married for a number of years. Marcy is very wealthy, but Phil is not. In fact, Phil, who has only $200,000 of property, is very ill, and his doctor believes that he probably
A donor made large taxable gifts beginning in 2000 and a taxable gift in the current year. In the intervening years, the highest gift tax rates declined. In calculating the tax on taxable gifts of
Refer to the facts in Problem C:11-36, and prepare Form 1120-S, Schedule K based on these facts.Data from Problem C:11-36Mike and Nancy are equal shareholders in MN Corporation, an S corporation. The
Refer to the facts in Tax Form/Return Preparation Problem C:9-58. Now assume the company is an S corporation rather than a partnership. Additional facts are as follows:Drs. Bailey and Firth formed
Bottle-Up, Inc., was organized on January 8, 2010, and made its S election on January 24, 2010. The necessary consents to the election were filed in a timely manner. Its address is 1234 Hill Street,
One way to compare the accumulation of income by alterative business entity forms is to use mathematical models. The following models express the investment after-tax accumulation calculation for a
Alice, a married taxpayer, will form Morning Corporation in the current year. Alice plans to acquire all of Morning’s common stock for a $1 million contribution to the corporation. Morning will
Cara, Bob, and Steve want to begin a business on January 1, 2021. The individuals are considering three business forms—C corporation, partnership, and S corporation.Cara has investment land with a
Indicate in each of the following independent situations whether the taxpayer can accomplish what is proposed. Provide adequate authority for your answer including any special elections that are
Tango Corporation, a calendar year taxpayer, has been an S corporation for several years. Tango’s business activities have become very profitable in recent years. On June 16, 2020, its sole
Orlando Corporation, a calendar year taxpayer, has been an S corporation for several years. On July 9, 2020, Orlando authorizes a second class of nonvoting preferred stock that pays a 10% annual
Voyles Corporation, a calendar year taxpayer formed five years ago, desires to make an S election beginning in 2021. Sue and Andrea each own one-half of the Voyles stock.a. How does Voyles make the S
Carl Carson, a single taxpayer, owns 100% of Delta Corporation. During 2020, Delta reports $150,000 of taxable income. Carl reports no income other than that earned from Delta, and Carl claims the
Sarah and Rex formed SR Entity on December 28 of last year. The entity operates on a calendar tax year. Each individual contributed $800,000 cash in exchange for a 50% ownership interest in the
Rho Corporation owns 22% of Divvy Corporation’s stock. Divvy has paid Rho $100,000 in dividends for the current year with the last dividend payment made on December 15. Rho is doing some year-end
The following income and expense accounts appeared in the book accounting records of Rocket Corporation, an accrual basis taxpayer, for the current calendar year.The following additional information
Zeta Corporation’s taxable income for 2019 was $1.1 million, on which Zeta paid federal income taxes of $231,000. Zeta estimates calendar year 2020’s taxable income to be $2 million, on which it
Explain the difference between closed-fact and open-fact situations.
Under a divorce agreement executed in 2017, an ex-wife receives from her former husband cash of $25,000 per year for eight years. The agreement does not explicitly state that the payments are
Access the Federation of Tax Administrators Internet site at www. taxadmin.org/state-tax-forms and indicate the titles of the following state tax forms and publications:a. Minnesota Form M-100b.
What are the Sec. 351 reporting requirements?
In the current year, the City of Omaha donates land worth $500,000 to Ace Corporation to induce it to locate in Omaha and create an estimated 2,000 jobs for its citizens.a. How much income, if any,
Eric Wright conducts a dry cleaning business as a sole proprietorship. The business operates in a building that Eric owns. Last year, Eric mortgaged for $150,000 the building and the land on which
Theta Corporation reports the following results for the current year:Gross profits on sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Delta Corporation incurs a $100,000 NOL in 2020. In 2021, the corporation reports the following items:Gross profit from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beta Corporation reports the following results for the current year:Gross income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .$180,000Dividends from less-than-20%-owned
Value Corporation is a calendar year taxpayer that uses the accrual method of accounting. On December 10 of the current year, Value accrues a bonus payment of $100,000 to Brett, its president and
Wright Corporation’s taxable income for calendar years 2017, 2018, and 2019 was $120,000, $150,000, and $100,000, respectively. Its total tax liability for 2019 was $21,000. Wright estimates that
Alpha Corporation reports the following results for the current year:Net income per books (before federal income taxes) . . . . . . . . . . . . . . . . . . . . . . . . . $738,000Federal income tax
Omega Corporation, a regular C corporation, presents you with the following partial book income statement for the current year:Omega also provides the following partial balance sheet information:You
In the current year, Alpha Corporation generated $500,000 of ordinary operating income and incurred a $20,000 capital loss on the sale of marketable securities from its investment portfolio. Alpha
Jackson Corporation prepared the following book income statement for its year ended December 31, 2020:Information on equipment depreciation and sale:Equipment 1:• Acquired March 3, 2018 for
Melodic Musical Sales, Inc. is located at 5500 Fourth Avenue, City, ST 98765. The corporation uses the calendar year and accrual basis for both book and tax purposes. It is engaged in the sale of
Permtemp Corporation (EIN: XX-1234567) formed in 2018 and, for that year, reported the following book income statement and balance sheet, excluding the federal income tax expense, deferred tax
Refer to the facts in Problem C:3-58, and prepare Form 1120, Schedule M-1 based on these facts.
Refer to the facts in Problem C:3-60. Assume that Omega Corporation’s employer identification number is XX-1234321 and that Omega’s income statement is unaudited and non-tax based (it is GAAP
For many years preceding 2018, Minimis Corporation, a calendar year corporation, had incurred the alternative minimum tax (AMT) and as a result had a $2 million minimum tax carryover into 2018.
What effect do the following transactions have on the calculation of Young Corporation’s current E&P? Assume that the starting point for the calculation is Young’s taxable income for the
John, who is unmarried, died on March 3, 2020. His gross estate of $16.5 million includes First Corporation stock (400 of the 1,000 outstanding shares) worth $10 million or $25,000 per share
Several years ago, Brian formed Sigma Corporation, a retail company. Sigma uses the accrual method of accounting. In the current year, the corporation reported the following items:Gross profit . . .
Marsha owns 100% of Gamma Corporation’s common stock. Gamma is an accrual basis, calendar year corporation. Marsha formed the corporation six years ago by transferring $250,000 of cash in exchange
Pamela owns 100% of Sigma Corporation’s stock. She purchased her stock ten years ago, and her current basis for the stock is $300,000. On June 10, Pamela decided to liquidate Sigma. Sigma’s
Shareholder owns 100% of Lambda Corporation stock and has a $700,000 basis in that stock. Shareholder has owned the stock for several years. Prior to liquidating, Lambda had the following balance
Majority Corporation owns 90% of Subsidiary Corporation’s stock and has a $45,000 basis in that stock. Mindy owns the other 10% and has a $5,000 basis in her stock. Subsidiary holds $20,000 cash
Gabriel Corporation is owned 90% by Zeier Corporation and 10% by Ray Goff, a Gabriel employee. A preliquidation balance sheet for Gabriel is presented below:Gabriel has claimed $150,000 of MACRS
The following facts pertain to Lifecycle Corporation:• Able owns a parcel of land (Land A) having a $30,000 FMV and $16,000 adjusted basis. Baker owns an adjacent parcel of land (Land B) having a
Sarah plans to invest $1 million in a business venture that will last five years. She is debating whether to operate the business as a C corporation or a sole proprietorship. If a C corporation, she
One way to compare the accumulation of income by alternative business entity forms is to use mathematical models. The following models express the investment after-tax accumulation calculation for a
Tango Corporation has one shareholder, Samantha, and Tango owns assets having a $400,000 FMV and $300,000 adjusted basis. Perth Corporation is interested in purchasing the assets, after which Tango
Acme Beverage Company transferred part of its assets to Lotus Technologies Corporation in exchange for all of Lotus’s stock. The transferred assets included its aluminum unit, which makes aluminum
Bioteknic Corporation announced that it had entered into a merger agreement with Zalco Corporation, a research-based pharmaceutical company and a leader in drug delivery technologies. In a nontaxable
Sec. 338 Election. Gator Corporation is considering the acquisition of Bulldog Corporation’s stock in exchange for cash. It is reviewing two options: (1) Gator purchases the assets from Bulldog for
Sec. 338 Election. J.S. Bachman owns 100% of Legato Corporation stock, having a $437,500 basis. On December 31 of the current year, Legato Corporation reported the following balance sheet:Staccato
Sec. 338 Basis Allocation. Alpha Corporation purchases all of Theta Corporation’s stock for $300,000 cash. Alpha makes a timely Sec. 338 election. Theta’s balance sheet at the close of business
In a merger in which it subsequently liquidates, Thomas Corporation transfers to Andrews Corporation all its assets and $100,000 of its liabilities in exchange for Andrews voting common stock, having
Silvia exchanges all her Theta Corporation stock (acquired August 1, 2016) for $300,000 of Alpha Corporation voting common stock pursuant to Theta’s merger into Alpha. Immediately after the
Parent Corporation has owned all 100 shares of Subsidiary Corporation common stock since 2013. Parent has been in the business of manufacturing and selling light fixtures, and Subsidiary has been in
At the close of business on May 31, 2020, Alaska Corporation exchanges $2 million of its voting common stock for all the noncash assets of Tennessee Corporation. Tennessee uses its cash to pay off
Murray Corporation’s stock is owned by about 1,000 shareholders, none of whom own more than 1% of the outstanding shares. Pursuant to a tender offer, Said, an individual investor, purchased all the
Albert Corporation is a profitable publicly traded corporation. None of its shareholders owns more than 1% of its outstanding shares. On December 31, 2019, Albert exchanged $8 million of its stock
Although the text does not cover reverse triangular mergers in any detail, this problem gives you an opportunity to (1) critically read selected IRC sections that define a Type B reorganization and a
The following advertisement appeared in a financial journal:$17 MILLION CASH WITHADDITIONAL CASH AVAILABLE$105 MM TAX LOSS GOOD THROUGH 2034CAPITAL GROUP, INC.NASDAQ listed w/300 shareholdersWANTS TO
P Corporation uses the calendar year as its tax year and the accrual method as its overall accounting method. S Corporation uses a fiscal year ending June 30 as its tax year and the cash method as
Miami and Tampa Corporations comprise an affiliated group that has filed separate tax returns prior to the current year. In each case for the current year, determine each corporation’s tax
Peoria and Salem Corporations have filed consolidated tax returns for several years. For the current year, consolidated taxable income is $300,000. The consolidated general business credit (computed
P and S Corporations form in Year 1, with S as P’s wholly-owned subsidiary. The corporations immediately elect to file consolidated tax returns. The group reports the following results:In what
P Corporation owns all the stock of S1 and S2 Corporations. The corporations have filed consolidated tax returns since their creation in Year 1. At the close of business on July 10 of Year 2, P sells
P Corporation acquires all of S Corporation’s stock on January 1 of Year 2. In Year 1, the corporations were unrelated entities that filed separate returns. P and S report the following
P Corporation owns all the stock of S1 and S2 Corporations, and the group has filed consolidated tax returns on a calendar year basis for several years. In the current year (Year 1), S2 sells to S1

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