Exam 2 long problems

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16 Terms

1
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7 Negative current E&P + distribution date

  1. current E&P*month/12

  2. 1 + accm enp

  3. distribution

  4. new accm enp = accm enp - current - dividend


2
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7 Property distributed to shareholder

Corp

  1. realized gain = amount realized - basis

  2. add gain to taxable income *tax

  3. ending enp = 2 + accm enp + liabilities - fmv

shareholder

  1. basis = fmv

  2. dividend = fmv - liability


3
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7 Substantially disproportionate redemption

  1. % ownership before/after

  2. see if pass < 50% or (Before%*80%)

  3. if fail treat entire amount as dividend, if pass treat some as basis return and some as capital gain


4
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7 Redemption qualified as exchange + asks ending E&P

  1. remove dividends from current E&P

  2. 1 * date/12

  3. add accm E&P to 2

  4. 3 - < of cash or redemption

  5. + 2


5
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8 no boot

  1. realized gain = amount realized - basis

  2. recognized gain (0)

  3. shareholder stock basis (fmv)


6
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8 cash and mortgage assumed

  1. realized gain = amount realized - basis

  2. recognized gain (0)

  3. shareholder stock basis


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8 property vs service distribution

property

  1. amount realized - basis

  2. recognized gain (0)

  3. shareholder basis

*if below 80% 2 = 1, and basis = amount realized - realized gain

service

  1. income

  2. basis = income


8
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8 2 people and cash

cash person

  1. realized gain = amount realized - basis

  2. recognized gain (0)

  3. shareholder basis

property person

  1. realized gain = amount realized - basis

  2. recognized gain (<cash or realized gain)

  3. shareholder basis

  4. allocate boot to assets


9
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8 asset purchase

  1. amount realized = asking price+ liabilities

  2. gain = 1 - basis (BS) *then tax

  3. asking price - 2 = liquidation

  4. 3 - buyer basis = capital gain

*Buyer likes bc assets get FMV step-up.

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8 stock purchase

  1. gain = selling price - basis

  2. gain = 0

  3. buyers basis = selling price

*asset basis unchanged, new stock basis

11
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for the questions with how much is a dividend and they have basis, what is the dristribution flow?

dividend → return of capital → capital gain

12
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basis =

dividend = (rocky)

fmv

fmv - liability

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redemption reduction =

< cash or (% given * available enp)

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shareholder stock basis formula

old basis + recognized gain - boot - liabilities

15
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amount realized =

STOCK, not fmv of property

16
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liquidation =

recognized gain =

what are we taxing?

asking price - tax

amount realized - basis

recognized gain