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Corporation of Deferred Tax Assets or Liability


I have some tax questions that I need help solving. Please be certain to show your work for the problems.



(1) Parker exchanges an apartment building in Wisconsin for Cassidy's apartment building in Florida. Parker's building has a fair market value of $500,000, is encumbered by a $200,000 mortgage, and has a basis of $275,000. Cassidy's building has a fair market value of $350,000, is encumbered by a $50,000 mortgage, and has a basis of $175,000. They each assume the mortgages on the properties received. What are Parker and Cassidy's amounts realized, their realized gain or loss, and their recognized gain or loss on the buildings exchanged?

(2) Allison Corporation (marginal tax rate of 34%) has $44,000 of tax depreciation in the current year. It also has a $40,000 bad debt deduction. For financial accounting, it has a total depreciation deduction of $28,000 and adds $50,000 to its bad debt reserve, the first year it has established a reserve. Determine if the corporation has a deferred tax asset or a deferred tax liability and its amount.

(3) Vanessa bought 2,000 shares of Glenco stock when the company was first formed for $57,000. The company had $900,000 of total capital when formed and the stock qualified as Section 1244 stock. Vanessa sold the stock three years later for $3,000. If Vanessa is single, how much gain or loss does she have on the sale of the stock and how will it be treated by her?

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Dear Student,

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Below are my answers.

Anna Liza Gaspar


Question 1
Type of exchange: Like-king qualified under Section 1031 of the Code
Tax treatment of realized gains or losses: Not recognized at the time of exchange, but if a boot is received, gain is recognized up to the extent of the boot.
Boot received: NONE
Basis of property acquired: the basis of the new property is the same as the basis of ...

Solution Summary

Corporation of deferred tax assets or liability is examined.