Accounting: Five Tax Questions
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1. What is the purpose of Code Sec. 351 in regard to transfers of corporations?
2. What tax years are available to corporations? How do the options differ from other forms of business organizations?
3. What are the differences in the treatment of capital gains and capital losses of corporations and of individuals?
4. Susan Sweets is a 40 percent shareholder in Acclaim Inc., a theatrical supplies company. She transfers a fully depreciated car with a value of $2,000 to the corporation, but does not receive any consideration for it.
a. What are the tax consequences to Susan?
b. What are the tax consequences to the corporation?
c. What, if any, changes if Susan received another 10 percent stock interest for the car?
5. A corporation has income of $62,000 from operations and a net long-term capital loss of $5,000. What is the corporation's taxable income for the year?
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This solution provides a detailed discussion of the given accounting questions.
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What is the purpose of Code Sec. 351 in regard to transfers of corporations?
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The purpose of Code Sec. 351 in regard to transfers of corporations is to ensure that gains and losses do not get recognized due to just the transfer of property to a corporation in exchange of stock. It also serves the purpose to ensure that in the case of such exchange, immediate control of the corporation is made not possible. This ensures impartiality for the corporation's control.
What tax years are available to corporations? How do the options differ from other forms of business organizations?
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The tax years available to corporations are any within any 365 day period. This option differs from other forms of business organizations in that like in the case of a sole proprietorship, the tax year available is restricted to the ...
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