RV

Question 1

general rule for calculating basis of property received by a corporation by a transferor/shareholder

Answer 1

the GREATER of the basis of the transferred asset or debt assumed by corporation
ex: Peter transferred property with his adjusted basis of 80 to corp, and corp assumed 20 of debt
basis is 80, since it’s greater than debt assumed

Question 2

S corp shareholders can terminate S corp if

Answer 2

majority votes to (can be any combo of non voting & voting, just has to be majority)

Question 3

how long does a S corporation have to wait to make a new S election if status is terminated

Answer 3

5 years

Question 4

general basis calculation for a partners basis in his/her partnership interest with no liabilities

Answer 4

Cash + Adjusted Basis of any property contributed

Question 5

capital gain in sale of partnership interest

Answer 5

gain/loss iS capital gain (unless there are hot assets, then will be ordinary income g/l

gain/loss is: (cash received + relief of debt from partnership liabilities) - basis in the partnership

Question 6

hot assets

Answer 6

Sec. 751(a) hot assets are unrealized receivables or substantially appreciated inventory

Question 7

what are distributions out of current and accumulated earnings and profits taxed as

Answer 7

taxable as dividend income to non-corporate shareholders

Question 8

if distribution > earnings & profits:

Answer 8

reduce’s shareholders basis in their shares by amount of excess. any amount beyond the excess required to reduce basis to zero is treated as received on the sale of stock and is a capital gain

ex: if distribution of 100, and profit of 75, shareholders would absorb their proportion of the 25 excess as a reduction of the shareholders basis

Question 9

how to avoid underpayment of taxes penalty

Answer 9

corporations must generally pay the ESTIMATED tax in the lower of:

100% of tax shown on the return for current year or prior year. NOTE: if loss in the proper year, corporation cannot use prior year tax

Question 10

what happens if ownership interest in S corporation change within the taxable year

Answer 10

income/loss is allocated on a “per share per day basis”

ex: loss of $36.5K/365 days = $100/day
then # days x $loss/perday * % owned
so if 40 days and owned 50%
=40 days*$100
=$4,000 *50%
=$2,000

Question 12

When partners share of partnership liabilities decreases, a partnerships basis:

Answer 12

Decreases by his or her share of the decrease