A taxpayer contributes property with an adjusted basis of $60,000 and a fair market value of $100,000 to his business entity. If the entity is an S corporation and the transaction qualifies under § 351, the S corporation’s basis for the asset and the shareholder’s basis for his stock are:
Asset Basis Stock Basis
a. $60,000 $100,000
b. $100,000 $60,000
c. $60,000 $60,000
d. $100,000 $100,000
e. None of the above.
Jasmine Company sold an asset on the first day of the tax year for $400,000. Its regular tax basis was $250,000, and its basis for Federal AMT purposes was $220,000. Because of differences in cost recovery schedules, the state basis in the asset was $200,000. What adjustment, if any, should be made to Federal taxable income in determining the correct taxable income for the typical state?
a. ($20,000).
b. ($50,000).
c. $50,000.
d. $100,000.
e. Some other amount.
Straw Corporation realized $800,000 of taxable income from the sales of its products in States X and Z. Straw’s activities in both states establish nexus for income tax purposes. Straw’s sales, payroll, and property among the states include the following.
State X State Z Totals
Sales $6,000,000 $4,000,000 $10,000,000
Property 500,000 1,500,000 2,000,000
Payroll 2,000,000 2,000,000 4,000,000
Both states use a three-factor apportionment formula, however X utilizes a double-weighted sales factor in its three-factor apportionment formula. How much of Straw’s taxable income is apportioned to Z?
a. $330,000.
b. $386,668.
c. $440,000.
d. $470,000.
e. None of the above
A taxpayer contributes property with an adjusted basis of $60,000 and a fair market value of $100,000 to his business entity. If the entity is an S corporation and the transaction qualifies under § 351, the S corporation’s basis for the asset and the shareholder’s basis for his stock are:
Answer :
Asset Basis Stock Basis
c. $60,000 $60,000
Jasmine Company sold an asset on the first day of the tax year for $400,000. Its regular tax basis was $250,000, and its basis for Federal AMT purposes was $220,000. Because of differences in cost recovery schedules, the state basis in the asset was $200,000. What adjustment, if any, should be made to Federal taxable income in determining the correct taxable income for the typical state?
C $50,000.
= 250000-200000
=50,000
Straw Corporation realized $800,000 of taxable income from the sales of its products in States X and Z. Straw’s activities in both states establish nexus for income tax purposes. Straw’s sales, payroll, and property among the states include the following.
State X State Z Totals
Sales $6,000,000 $4,000,000 $10,000,000
Property 500,000 1,500,000 2,000,000
Payroll 2,000,000 2,000,000 4,000,000
Both states use a three-factor apportionment formula, however X utilizes a double-weighted sales factor in its three-factor apportionment formula. How much of Straw’s taxable income is apportioned to Z?
b. $386,668.
