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Acct553 Week 4 Assignment

In: Business and Management

Submitted By thebeano
Words 355
Pages 2
Chapter 14

14-4

Code Sec. 351 states that no gain or loss be recognized upon transfer of property to a newly forming corporation in exchange for stock. This serves a beneficial purpose to those sole proprietors who are looking to move to the corporate form. If the sole proprietor were to transfer property that has appreciated and recognized a gain without Code Sec. 351, then this would constitute as a taxable transaction. Code Sec. 351 allows sole proprietors and partnerships to form corporations without negative tax consequences.

14-20

A C-Corporation can elect any end of month as the end of its fiscal year, however, S-Corporations must use the calender year as its fiscal period. S-Corporations can elect a different fiscal period if it meets certain requirements but this is not the norm. These options differ from those of a sole proprietorship and partnership in that a proprietorship or partnership must follow the same tax year as its owners. This allows the corporation to adjust its tax year to reflect its operations.

14-22

Corporations do not receive preferential treatment in regards to net-long term capital gains when compared to individuals. Capital gains must be included in the corporations ordinary income and taxed at the same rate as ordinary income. Furthermore, corporations are not allowed to deduct the excess of capital losses over capital gains against ordinary income in the year in which they occurred. Corporations must claim capital losses against capital gains. Individuals would be allowed to deduct capital losses against ordinary income up to a certain level.

14-55

a) There is no tax consequence for Susan in this exchange.

b) There is no tax consequence for the corporation in this exchange.

c) Since Susan would only be at 50% after the transfer, she would not be considered in control of the corporation and

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