Area 4: Entity Tax Planning

Individual A incorporates a business. A contributes property (Basis $20,000, FMV $100,000) for 100% of the stock. A also receives $10,000 cash from the corporation. What is A's recognized gain?

A taxpayer contributes services worth $50,000 in exchange for a 20% capital interest in a partnership. The partnership has no liabilities. What is the tax consequence to the taxpayer?

Corporation P acquires 100% of the stock of Target T for cash. P wants to treat the stock purchase as an asset purchase to step up the basis of T's assets. Which election should P make?

A taxpayer operates a Specified Service Trade or Business (SSTB) - a consulting firm. They are single with taxable income of $300,000 in Year 1. The QBI threshold for single filers is $191,950 (Year 1 approx). What is their QBI deduction?

A business owner wants to sell their company to their child using an installment sale. They sell the business for $1,000,000 (Basis $200,000). The child pays $100,000 in Year 1. The child resells the business to a third party for $1,000,000 in Year 2. What is the consequence to the original owner?

A C Corporation is liquidating. It distributes assets with a FMV of $500,000 and Basis of $200,000 to its sole shareholder. The shareholder's stock basis is $100,000. What are the tax consequences?

A business purchases equipment for $1,000,000 in Year 1. They want to maximize Year 1 deductions. Assuming they have sufficient income and the equipment qualifies, what is the optimal strategy?

A taxpayer is considering a Type A Reorganization (Statutory Merger). Target shareholders will receive 60% stock of Acquirer and 40% cash. Will this qualify as a tax-free reorganization?

A taxpayer sells a business asset (Section 1231 asset) for a gain of $50,000. In the previous 5 years, they had $20,000 of Section 1231 losses that were deducted as ordinary losses. How is the $50,000 gain taxed?

A sole proprietor buys a luxury SUV (Gross Vehicle Weight Rating > 6,000 lbs) for business use (100%). Cost is $80,000. What is the advantage regarding depreciation compared to a lighter passenger car?

A taxpayer is negotiating the sale of their business. They can structure it as an Asset Sale or a Stock Sale. The buyer prefers an Asset Sale. Why?

A taxpayer owns a rental property with a basis of $100,000 and FMV of $500,000. They want to exchange it for another rental property worth $500,000 to defer gain. They identify the replacement property 50 days after the sale of the relinquished property. Does this qualify as a Section 1031 exchange?