Complete the following Ch. 18 Problems:

Problems 18-35

Problems 18-36

Complete the following Ch. 19 Problems:

Discussion Question 19-1

Discussion Question 19-2

Problems 19-36

Problems 19-37

Problems 19-19

Problems 19-20

Problems 19-51

Problems 19-52

[The following information applies to the questions displayed below.]

Jayhawk Company reports current E&P of $357,500 and accumulated E&P of negative $255,000. Jayhawk distributed $590,000 to its sole shareholder, Christine Rock, on the last day of the year. Christine’s tax basis in her Jayhawk stock is $178,000. (Leave no answer blank. Enter zero if applicable. Negative amounts should be indicated by a minus sign.)

1.

a. How much of the $590,000 distribution is treated as a dividend to Christine?

2.

b. What is Christine’s tax basis in her Jayhawk stock after the distribution?

3.

c. What is Jayhawk’s balance in accumulated E&P on the first day of next year?

The following information applies to the questions displayed below.]

This year, Sooner Company reports current E&P of negative $488,000. Its accumulated E&P at the beginning of the year was $304,000. Sooner distributed $608,000 to its sole shareholder, Boomer Wells, on June 30 of this year. Boomer’s tax basis in his Sooner stock is $100,500. (Leave no answer blank. Enter zero if applicable. Negative amounts should be indicated by a minus sign.)

4.

a. How much of the $608,000 distribution is treated as a dividend to Boomer?

5.

b. What is Boomer’s tax basis in his Sooner stock after the distribution?

6.

c. What is Sooner’s balance in accumulated E&P on the first day of next year?

Chapter 19

[The following information applies to the questions displayed below.]

Ramon incorporated his sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation’s stock. The property transferred to the corporation had the following fair market values and adjusted bases:

FMV              Adjusted Basis

Inventory        $          14,500            $          5,600

Building                     61,000                        52,000

Land               156,000                                  55,500

Total    $          231,500                      $          113,100

The fair market value of the corporation’s stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Ramon. (Negative amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)

1.

a. What amount of gain or loss does Ramon realize on the transfer of the property to his corporation?

2.

b. What amount of gain or loss does Ramon recognize on the transfer of the property to his corporation?

3.

c. What is Ramon’s basis in the stock he receives in his corporation?

[The following information applies to the questions displayed below.]

Carla incorporated her sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation’s stock. The property transferred to the corporation had the following fair market values and adjusted bases:

FMV              Adjusted Basis

Inventory        $          27,500            $          17,600

Building                     177,000                                  129,000

Land               255,750                                  320,000

Total    $          460,250                      $          466,600

The corporation also assumed a mortgage of $147,750 attached to the building and land. The fair market value of the corporation’s stock received in the exchange was $312,500. (Negative amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)

4. a. What amount of gain or loss does Carla realize on the transfer of the property to the corporation?

5. What amount of gain or loss does Carla recognize on the transfer of the property to the corporation?

6. c. What is Carla’s basis in the stock she receives in her corporation?

[The following information applies to the questions displayed below.]

Robert and Sylvia propose to have their corporation, Wolverine Universal (WU), acquire another corporation, EMU Inc., in a stock-for-stock Type B acquisition. The sole shareholder of EMU, Edie Eagle, will receive $572,500 of WU voting stock in the transaction. Edie’s tax basis in her EMU stock is $123,000. (Negative amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)

7.a. What amount of gain or loss does Edie recognize if the transaction is structured as a stock-for-stock Type B acquisition?

8. b. What is Edie’s tax basis in the WU stock she receives in the exchange?

9. c. What is the tax basis of the EMU stock held by WU after the exchange?

[The following information applies to the questions displayed below.]

Shauna and Danielle decided to liquidate their jointly owned corporation, Woodward Fashions Inc. (WFI). After liquidating its remaining inventory and paying off its remaining liabilities, WFI had the following tax accounting balance sheet:

FMV              Adjusted Basis                       Appreciation

Cash    $          200,000                      $          200,000

Building                     50,000                        10,000                        40,000

Land               150,000                                  90,000                        60,000

Total    $          400,000                      $          300,000                      $          100,000

Under the terms of the agreement, Shauna will receive the $200,000 cash in exchange for her 50 percent interest in WFI. Shauna’s tax basis in her WFI stock is $50,000. Danielle will receive the building and land in exchange for her 50 percent interest in WFI. Danielle’s tax basis in her WFI stock is $100,000. Assume for purposes of this problem that the cash available to distribute to the shareholders has been reduced by any tax paid by the corporation on gain recognized as a result of the liquidation. (Leave no answer blank. Enter zero if applicable. Negative amounts should be indicated by a minus sign.)

10. a. What amount of gain or loss does WFI recognize in the complete liquidation?

11. b. What amount of gain or loss does Shauna recognize in the complete liquidation?

12. c. What amount of gain or loss does Danielle recognize in the complete liquidation?

13. d. What is Danielle’s tax basis in the building and land after the complete liquidation?