Complete the following Ch. 22 Problems:

Discussion Question 22-15

Discussion Question 22-16

Problems 22-51

Problems 22-54

Problems 22-66

Problems 22-67

Complete the following Ch. 24 Problems:

Discussion Question 24-11

Discussion Question 24-12

Discussion Question 24-31

Discussion Question 24-33

1.

Apple Union (AU), a C corporation with a March 31 year-end, uses the accrual method of accounting. If AU elects to be taxed as an S corporation, what will its year-end and method of accounting be (assuming no special elections)?

2.

Compare and contrast the method of allocating income or loss to owners for partnerships and for S corporations.

3. 3.Award: 1 out of 1.00 point Show correct answer

Assume Jack and Jill, 25 and 75 percent shareholders in UpAHill Corporation, have tax bases in their shares at the beginning of year 1 of $24,000 and $56,000, respectively.

UpAHill Corporation (an S Corporation)

Income Statement

December 31, year 1 and year 2

Year 1            Year 2

Sales revenue  $          175,000                                  $          310,000

Cost of goods sold                 (60,000            )                                  (85,000            )

Salary to owners Jack and Jill            (40,000            )                                  (50,000            )

Employee wages                    (15,000            )                                  (20,000            )

Depreciation expense             (10,000            )                                  (15,000            )

Miscellaneous expenses                     (7,500  )                                  (9,000  )

Interest income                      2,000                                      2,500

Dividend income                   500                                         1,000

Overall net income      $          45,000                        $          134,500

Also assume no distributions were made. Given the income statement above, what are their tax bases in their shares at the end of year 1?

4.

Harry, Hermione, and Ron formed an S corporation called Bumblebore. Harry and Hermione both contributed cash of $25,000 to get things started. Ron was a bit short on cash but had a parcel of land valued at $60,000 (basis of $50,000) that he decided to contribute. The land was encumbered by a $35,000 mortgage. What tax bases will each of the three have in his or her stock of Bumblebore?

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

Maple Corp., a calendar-year corporation, was formed three years ago by its sole shareholder, Brady, who immediately elected S corporation status. On December 31 of the current year, Maple distributed $30,000 cash to Brady.

What is the amount and character of gain Brady must recognize on the distribution in each of the following alternative scenarios? (Leave no answer blank. Enter zero if applicable.)

5.

a. At the time of the distribution, Brady’s basis in his Maple Corp. stock was $35,000.

6.

b. At the time of the distribution, Brady’s basis in his Maple Corp. stock was $8,000.

7.

c. At the time of the distribution, Brady’s basis in his Maple Corp. stock was $0.

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

Oak Corp., a calendar-year corporation, was formed three years ago by its sole shareholder, Glover, and has always operated as a C corporation. However, at the beginning of this year, Glover made a qualifying S election for Oak Corp., effective January 1. Oak Corp. did not have any C corporation earnings and profits on that date. On June 1, Oak Corp. distributed $15,000 to Glover.

What is the amount and character of gain Glover must recognize on the distribution, and what is his basis in his Oak Corp. stock in each of the following alternative scenarios?  (Leave no answer blank. Enter zero if applicable.)

8.

a. At the time of the distribution, Glover’s basis in his Oak Corp. stock was $35,000.

9.

b. At the time of the distribution, Glover’s basis in his Oak Corp. stock was $8,000.

10.

c. At the time of the distribution, Glover’s basis in his Oak Corp. stock was $0.

Chapter 24

1. Why are the income source rules important to a U.S. citizen or resident?

2.

Why are the income source rules important to a U.S. nonresident?

3.

What is a hybrid entity for U.S. tax purposes? Why is a hybrid entity a popular organizational form for a U.S. company expanding its international operations? What are the potential drawbacks to using a hybrid entity?

4.

What are the requirements for a foreign corporation to be a controlled foreign corporation for U.S. tax purposes?