corporate tax accounting questionsI need a tutor who will be able to answer these questions and respond promptly.The questions attached are just examples, not the real questions that I need help with.Just check those question out to see if you could answer them and if you coul just place a bid.Then I will send you the real questions.There are roughly 10 questions that I need help with.
Exam 3 Review Problems
At the beginning of 2019, Joan loans her S corporation $10,000. By the end of 2019, Joan’s stock basis is zeroand the basis of her loan has been reduced to $6,000. During 2020, the company’s operating income is $6,000.The company makes distributions of $10,000 to Joan. She reports a(n):a. $4,000 LTCG.b. $10,000 LTCG.c. Loan basis of $0.d. Loan basis of $10,000.e. Stock basis of $4,000.
Bird, Inc., an S corporation, distributes a tract of land to Jean, its sole shareholder. The land was purchased by theS corporation for $45,000 and has a value of $120,000 at the time of the distribution. At the end of the year,Bird’s Accumulated Adjustments Account is $10,000, Accumulated Earnings and Profits of $25,000 and Jean has$50,000 of stock basis. What is Jean’s stock basis after the transaction?a. $0.b. $30,000.c. $115,000.d. $5,000.e. $(70,000).
The trustee of the Queen Trust is required to distribute all of the annual accounting income from the trust equallyto two beneficiaries, Thomas, an individual, and Wake Forest University, a qualified 501(c)(3) charity. The trustincurred the following this year:Taxable interest income $35,000Dividend income 10,000Tax-exempt interest income 15,000Long-term capital gain – allocable to corpus 5,000What is the trust’s DNI?a. $27,200.b. $30,000.c. $15,000.d. $20,000.e. $37,500.
Paul and Prue, individuals, are the beneficiaries of the GBBS Trust, a simple trust. The trust incurs the followingduring the year:Rental income $60,000Rental expenses 15,000Depreciation expense 10,000Trustee fees 5,000How much depreciation can the trust deduct when calculating its taxable income (From 1041)?a. $10,000.b. $5,000.c. $7,500.d. $0.
The Winston-Salem Museum of Art operates a café adjacent, but not connected, to the museum where patrons andthe general public can enjoy lunch or snacks. The café has sales of $200,000 during the year and related expensesof $160,000. What if any, is the museum’s unrelated business income tax (“UBIT”)?a. $0.b. $8,400.c. $40,000.d. $39,000.e. $8,190.
Demon Deacon died in 2020. The executor of Mr. Deacon’s estate identified the following assets:Stocks in Demon’s name only $2,000,000Investment property in a trust that Demon has the right to revoke 1,500,000Primary home owned jointly with his spouse (spouse did not contribute to the purchase) 1,000,000Insurance policy owned by and insuring Demon with the proceeds payable to his daughter 800,000Vacation home owned jointly with his son (son did not contribute to the purchase) 500,000Cash placed in an irrevocable trust by Demon eight years ago with Demon’s friend as trustee 600,000What is the value of Demon Deacon’s gross estate for estate tax purposes?a. $3,500,000.b. $4,250,000.c. $5,300,000.d. $6,400,000.
At the time of her death, Jamey was involved in the following.• Jamey owned an insurance policy on her life for which her spouse Riley is the beneficiary. Theface amount of the policy is $100,000 and it had a cash surrender value of $25,000.• Jamey’s spouse Riley owns a $1 million life insurance policy on Jamey’s life. Riley is thebeneficiary.• Jamey owned a residence with her spouse Riley as joint tenants. Riley purchased the residenceten years ago for $300,000. At her death, the residence has a FMV of $1.4 million.As to these transactions, Jamey’s estate will receive a marital deduction of:a. $1,100,000.b. $800,000.c. $2,425,000.d. $1,825,000.e. $750,000.Answers:
aThe S corporation does not have a net increase for the year – 6,000 income less 10,000 of distributions is a net decrease.To increase the debt basis, there must be a net increase. The debt basis remains unchanged at $6,000. The stock basis isincreased by the income of $6,000 and reduced to zero (not below) by $6,000 of distributions. The remaining $4,000 ofdistributions are in excess of basis and therefore a capital gain.
bThe S corp recognizes a gain on the distribution of appreciated property of $75,000 (FMV 120,000 less basis of 45,000).The gain passes through to the shareholder and increases both AAA and her stock basis. The distribution is the FMV ofthe property. The distribution ordering rules require the following order: AAA, AEP, OAA, Stock basis.AAA AEP Stock basisBeginning balance 10,000 25,000 50,000Recognized gain 75,000 75,000Subtotal 85,000 25,000 125,000Distribution
AAA -85,000 -85,000
AEP -25,000
Stock basis -10,000Total 0 0 30,000
bExpenses related to the production of tax-exempt income are not tax deductible. The trust is required to pay eachbeneficiary $30,000 (1/2 of the trust accounting income of $60,000). The $30,000 to the charity is deemed to have beenpaid proportionately from all of the gross income allocated to trust accounting income. The ratio to calculate how muchof the contribution is deductible is (45,000/60,000 – taxable income of 35 and 10 over total income of 60 – x 30,000 ofcontributions). $22,500 of the $30,000 charitable contribution is deductible. When calculating the DNI, one of theadjustments is to add back the net tax-exempt income. Gross tax-exempt is $15,000 and the non-deductible portion of thecharitable contribution is $7,500, thus the add-back for DNI is $7,500. The distribution deduction is the deductible portionof DNI, which would not include the $7,500 related to tax-exempt. The check for the taxable income of the trust is the$5,000 capital gain that was allocated to corpus net of the $300 personal exemption.T.A.I. Corpus TaxableincomeTaxable interest income $35,000 $35,000Dividend income 10,000 10,000Tax-exempt interest income 15,000 0Long-term capital gain – allocable to corpus 5,000 5,000Charitable contribution -22,500Personal exemption (required to pay) -300Taxable income before the distribution deduction 27,200DNI calculation
Add back personal exemption 300
Add back net tax-exempt 7,500
Subtract capital gains allocable to corpus -5,000DNI 30,000Distribution deduction 22,500Trust Taxable income 4,700
dA simple trust is required to distribute all of its trust accounting income. The allocation of the depreciation deductionfollows the allocation of the trust accounting income. Because all of the accounting income is distributed, thedepreciation deduction will be allocated to the beneficiaries.
eThe income from the café is UBI. The UBIT is calculated as follows: $200,000 – 160,000 – 1,000 (standard deduction) =39,000 x 21% = $8,190.
cThe investment property in the trust Demon Deacon can revoke is part of the gross estate because the ability torevoke gives Demon Deacon control of the trust asset. Cash in the irrevocable trust is not part of the estate becauseDemon Deacon cannot access a trust that is irrevocable.An asset owned jointly with a spouse is included in the gross estate in an amount equal to one-half of theasset’s value (regardless of which spouse purchased the asset).An asset owned jointly between non-married parties is fully included in the deceased joint owner’s estate,less the amount the surviving joint owner contributed to the purchase of the asset.Although life insurance proceeds are not paid until the death of the insured, if the insured owns the policy,the death benefit is included in the gross estate.
b$100,000 of proceeds from the first insurance policy. Jamey is the owner and insured and her spouse is the beneficiary$0 of the second life insurance policy. Upon Jamey’s death, the proceeds paid to Riley do not pass from one spouse to theother. Riley is the owner of the policy.$700,000 of the residence.
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