Martinakom

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Accounting,Applied Sciences See all
Accounting,Applied Sciences,Architecture and Design,Biology,Business & Finance,Calculus,Chemistry,Computer Science,Geology Hide all
Teaching Since: Jul 2017
Last Sign in: 402 Weeks Ago, 2 Days Ago
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Category > Accounting Posted 09 Aug 2017 My Price 6.00

ACCT 6353

ACCT 6353

Facts:

1.    Paul and Jon are partners in a small successful restaurant. They want to expand but need a second location. They think their business has a FMV of $1,000,000 (and has a basis of $500,000 to Paul and a basis of $250,000 to Jon).

 

2.     Jason is a real estate broker and investor. He normally buys real estate and sells it quickly.  He is fully licensed as a real estate broker in Texas.   Jason has a vacant lot that he paid $300,000 several years ago. The FMV is currently $500,000.

 

3.    All three create JPJ, Inc with one third ownership each.

 

4.    In year one they consider the following:

 

a.    The corporation will distribute out to Jason a part of the parking lot (of the old location). The FMV is $100,000 and the basis to the corporation is $75,000. Jason will contribute the new land with a FMV of $150,000 plus $50,000 in cash.

b.    Separately, they want to pay a distribution of $25,000 to each shareholder in cash. The EP balance is zero for accumulated and $40,000 for current. 

 

Assignment:

 What is the income tax consequences idea #4a?

 

 What is the income tax consequences idea #4b?

 

Is there a better economic structure that will give the three people the result they desire? If so what it is and defend the idea.

Answers

Martinakom
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Status NEW Posted 09 Aug 2017 11:08 AM My Price 6.00

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