Wills Corporation, which has accumulated a current E&P totaling $70,000, distributes land to its sole shareholder, an individual. The land has an FMV of $75,000 and an adjusted basis of $60,000. The shareholder assumes a $15,000 liability associated with the land. The transaction will have the following tax consequences.
A) The corporation will recognize a $15,000 gain; the shareholder will recognize dividend income of $75,000.
B) The corporation will recognize no gain; the shareholder will recognize dividend income of $75,000.
C) The corporation will recognize a $15,000 gain; the shareholder will recognize dividend income of $60,000.
D) The corporation will recognize no gain; the shareholder will recognize dividend income of $60,000.
C) The corporation will recognize a $15,000 gain; the shareholder will recognize dividend income of $60,000.
The corporation will recognize $15,000 ($75,000 FMV - $60,000 basis) of gain as if it had sold the property immediately preceding the distribution. The shareholder has dividend income equal to the $75,000 FMV minus the $15,000 of liabilities assumed, or $60,000, (but not in excess of the E&P).
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Stan read an advertisement in the newspaper that said that the jackpot for picking the six winners in the dog race on the last night of the season was $825,000. Stan went that night and correctly picked the winners. However, it turned out that the newspaper had made a mistake. The jackpot was $25,000, not $825,000. Therefore, the track owners refused to pay the latter amount. If this ad is treated like offers of reward, can Stan collect the $825,000?
What will be an ideal response?
Athens Company's salaried employees earn two weeks of vacation per year. The company estimated and must expense $9800 of accrued vacation benefits for the year. Which of the following is the necessary year-end adjusting entry to record accrued vacation benefits?
A. Debit Vacation Benefits Expense $19,700; credit Vacation Benefits Payable $19,700. B. Debit Vacation Benefits Payable $19,700; credit Vacation Benefits Expense $19,700. C. Debit Vacation Benefits Payable $9800; credit Vacation Benefits Expense $9800. D. Debit Vacation Benefits Expense $9800; credit Vacation Benefits Payable $9800. E. Debit Vacation Benefits Expense $20,360; credit Vacation Benefits Payable $20,360.
In order for quick response (QR) inventory planning to be effective, _____
a. inventory ordering costs need to be low b. inventory holding costs need to be low c. electronic data interchange must not be functioning d. shipping costs must be reduced
The trial balance of WM Partnership is as follows: DebitCreditCash$25,000 Accounts Receivable (net) 30,000 Inventory 50,000 Equipment (net) 95,000 Accounts Payable $50,000 Wilfred, Capital 100,000 Mike, Capital 50,000 Total$200,000 $200,000 Wilfred and Mike decide to incorporate their partnership. The partnership's books will be closed, and new books will be used for W & M Corporation. The following additional information is available: 1. The estimated fair values of the assets follow: Accounts Receivable$26,000 Inventory 46,000 Equipment 84,000 2. All assets and liabilities are transferred to the corporation. 3. The common stock is $10 par. Wilfred and Mike receive a total of 10,000 shares. 4. The partners share
profits and losses in the ratio 7:3. Based on the preceding information, the journal entry on the partnership's books to record distribution of stock to prior partners will include a debit to Mike, Capital for: A. $31,500. B. $42,000. C. $38,010. D. $44,300.