Gold Canyon Inc. was formed on September 12, 2015, by the following shareholders all of whom...

 

 

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Gold Canyon Inc. was formed on September 12, 2015, by the following shareholders all of whom contributed cash in exchange for their stock: Lisa Janet Thomas (1) The shareholders are unrelated US citizens, although Lisa lives in Toronto Canada. The corporation is a cash basis calendar year corporation. On February 10, 2022, the shareholders agreed to elect S-Corporation status and properly signed and filed the election form with the IRS on March 5, 2022. As of January 1, 2022, Gold Canyon Inc.'s (GC) balance sheet was as follows: $ 50,000 $ 75,000 $150,000 Cash Account Receivable Land A Land B Land C Land D Land E Land F Building Land Building 500 shares 750 shares 1,500 shares Loan Land A Loan Land B Loan - Land C Loan - Land F Accounts Payable Shareholder loan - Thomas Loan - Building Common Stock Retained Earnings Tax Basis 325,000 200,000 250,000 500,000 100,000 75,000 450,000 450,000 25,000 2,375,000 210,000 125,000 300,000 275,000 100,000 375,000 275,000 715,000 2,375,000 FMV 325,000 45,000 175,000 290,000 650,000 85,000 55,000 615,000 685,000 78,000 3,003,000 210,000 125,000 300,000 275,000 34,000 100,000 375,000 1,584,000 FMV of Equity 3,003,000 (1) Accumulated depreciation $106,307 GC has two activities, the rental of an office building and investing in land for appreciation. As of January 1, 2022, the corporation owned six parcels of land that were being held as investment (all the land has been held long-term as of January 1, 2022) and one rental building. At the time of the S-Corporation election the corporation had: $695,000 of Earnings & Profits $57,000 capital loss carry-forward $8,000 NOL carry-forward As of January 1, 2023, GC's corporate level accounts showed: AAA of $75,000 E&P of $525,000 For 2023 GC reported the following: In 2022 the corporation collected the $45,000 account receivable and paid the $34,000 account payable. The corporation continued to own all of the other properties listed on the January 1, 2022 balance sheet, until transactions in 2023. The $42,000 capital loss carry-forward is still available for proper use in 2023. The shareholders' stock bases as of January 1, 2023, are as follows: Lisa Janet Thomas Land C was sold to an investment group for $1,025,000 on September 18, 2023. The investment group paid $725,000 in cash and took the land subject to the loan of $300,000. Land D was sold to Thomas for $55,000 on October 15, 2023, its FMV per an independent third party. On December 1, 2023, GC distributed prorata $500,000 in money to its three shareholders. Calculate the following: O O O vi. $ 50,000 $ 75,000 $150,000 Net ordinary rental loss of $295,000 from the building activity. Land A and Loan-Land A were distributed prorata to the three shareholders on April 1, 2023. Land A's FMV was $305,000 on the date of the distribution and the loan had a balance owed of $210,000. i. ii. iii. iv. V. 1374 tax, if any (see limitations under 1374(d)(2)(A)) Calculate the remaining, if any, net unrealized built in gain at 1/1/24 AAA and E & P after the distributions, at the end of the year Amount and character of the flow through items Impact on shareholder stock basis (show proper order for the adjustment of stock basis and support the order by proper IRC/Regulation citations) and shareholder taxable income If GC made a "by-pass election" involving the distributions, then how would this change the above answers? What is a "by-pass election" (describe it and support how it works by citation)? Gold Canyon Inc. was formed on September 12, 2015, by the following shareholders all of whom contributed cash in exchange for their stock: Lisa Janet Thomas (1) The shareholders are unrelated US citizens, although Lisa lives in Toronto Canada. The corporation is a cash basis calendar year corporation. On February 10, 2022, the shareholders agreed to elect S-Corporation status and properly signed and filed the election form with the IRS on March 5, 2022. As of January 1, 2022, Gold Canyon Inc.'s (GC) balance sheet was as follows: $ 50,000 $ 75,000 $150,000 Cash Account Receivable Land A Land B Land C Land D Land E Land F Building Land Building 500 shares 750 shares 1,500 shares Loan Land A Loan Land B Loan - Land C Loan - Land F Accounts Payable Shareholder loan - Thomas Loan - Building Common Stock Retained Earnings Tax Basis 325,000 200,000 250,000 500,000 100,000 75,000 450,000 450,000 25,000 2,375,000 210,000 125,000 300,000 275,000 100,000 375,000 275,000 715,000 2,375,000 FMV 325,000 45,000 175,000 290,000 650,000 85,000 55,000 615,000 685,000 78,000 3,003,000 210,000 125,000 300,000 275,000 34,000 100,000 375,000 1,584,000 FMV of Equity 3,003,000 (1) Accumulated depreciation $106,307 GC has two activities, the rental of an office building and investing in land for appreciation. As of January 1, 2022, the corporation owned six parcels of land that were being held as investment (all the land has been held long-term as of January 1, 2022) and one rental building. At the time of the S-Corporation election the corporation had: $695,000 of Earnings & Profits $57,000 capital loss carry-forward $8,000 NOL carry-forward As of January 1, 2023, GC's corporate level accounts showed: AAA of $75,000 E&P of $525,000 For 2023 GC reported the following: In 2022 the corporation collected the $45,000 account receivable and paid the $34,000 account payable. The corporation continued to own all of the other properties listed on the January 1, 2022 balance sheet, until transactions in 2023. The $42,000 capital loss carry-forward is still available for proper use in 2023. The shareholders' stock bases as of January 1, 2023, are as follows: Lisa Janet Thomas Land C was sold to an investment group for $1,025,000 on September 18, 2023. The investment group paid $725,000 in cash and took the land subject to the loan of $300,000. Land D was sold to Thomas for $55,000 on October 15, 2023, its FMV per an independent third party. On December 1, 2023, GC distributed prorata $500,000 in money to its three shareholders. Calculate the following: O O O vi. $ 50,000 $ 75,000 $150,000 Net ordinary rental loss of $295,000 from the building activity. Land A and Loan-Land A were distributed prorata to the three shareholders on April 1, 2023. Land A's FMV was $305,000 on the date of the distribution and the loan had a balance owed of $210,000. i. ii. iii. iv. V. 1374 tax, if any (see limitations under 1374(d)(2)(A)) Calculate the remaining, if any, net unrealized built in gain at 1/1/24 AAA and E & P after the distributions, at the end of the year Amount and character of the flow through items Impact on shareholder stock basis (show proper order for the adjustment of stock basis and support the order by proper IRC/Regulation citations) and shareholder taxable income If GC made a "by-pass election" involving the distributions, then how would this change the above answers? What is a "by-pass election" (describe it and support how it works by citation)?