Principles Of Taxation For Business And Investment Planning 2020 Edition
23rd Edition
ISBN: 9781259969546
Author: Sally Jones, Shelley C. Rhoades-Catanach, Sandra R Callaghan
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 1, Problem 1AP
Mr. Josh Kenney, a U.S. citizen and resident of Vermont, owns 100 percent of the stock of JK Services, which is incorporated under Vermont law and conducts business in four counties in the state. JK Services owns 100 percent of the stock of JK Realty, which is incorporated under Massachusetts law and conducts business in Boston.
- a. How many taxpayers are identified in the given statement of facts?
- b. Identify the governments with jurisdiction to tax each of these taxpayers.
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Tia Kline, a resident of Canada, is the sole shareholder of KI Inc. She plans to transfer four assets, which she owns, to Kl Inc. in
exchange for cash and preferred shares of KI Inc. She wishes to receive the maximum amount in cash that she can receive and still
defer the recognition of income for tax purposes on the transfer of the assets. Tia and KI Inc. will jointly make a Section 85 election for
each of the assets. The following chart outlines the details of the assets.
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$ 260,000 $
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52,000 $
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$432,500 $ 142,000 $ 46,500
For each of the four assets individually, state the amount that should be elected as proceeds under Section 85 of the Income Tax Act,
state the amount of cash consideration, and state the value of the preferred shares Ms. Kline should accept as consideration for the
assets.
FMV
ACB
UCC
Elected
amount
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Shares
Inventory
$
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52,000
0…
Tia Kline, a resident of Canada, is the sole shareholder of KI Inc. She plans to transfer four assets, which she owns, to KI Inc. in
exchange for cash and preferred shares of KI Inc. She wishes to receive the maximum amount in cash that she can receive and
still defer the recognition of income for tax purposes on the transfer of the assets. Tia and KI Inc. will jointly make a Section 85
election for each of the assets. The following is the details of the assets:
FMV
UCC
$ 230,000
115,000
10,350
46,000
АСВ
$ 46,000
80,500
34,500
20,000
$ 181,000
Land
Building
Equipment
57,500
9,200
17,575
$ 84,275
Goodwill
$ 401,350
Required:
For each of the four assets individually, state the amount that should be elected as proceeds under Section 85 of the Income
Tax Act, state the amount of cash consideration, and state the value of the preferred shares Ms. Kline should accept as
consideration for the assets
Elected
Preferred
FMV
ACB
UCC
Cash
amount
Shares
Land
$
230,000 $
46,000
Building
115,000…
Tia Kline, a resident of Canada, is the sole shareholder of KI Inc. She plans to transfer four assets, which she owns, to KI Inc. in
exchange for cash and preferred shares of KI Inc. She wishes to receive the maximum amount in cash that she can receive and
still defer the recognition of income for tax purposes on the transfer of the assets. Tia and KI Inc. will jointly make a Section 85
election for each of the assets. The following is the details of the assets:
Land
Building
Equipment.
Goodwill
Land
Building
Equipment
Goodwill
FMV
ACB
$ 230,000 $ 46,000 $
115,000
10,350
46,000
$ 401,350 $ 181,000 $ 84,275
Required:
For each of the four assets individually, state the amount that should be elected as proceeds under Section 85 of the Income
Tax Act, state the amount of cash consideration, and state the value of the preferred shares Ms. Kline should accept as
consideration for the assets
$
FMV
$ 230,000 $
115,000
10,350
46,000
401,350
80,500
34,500
20,000
ACB
46,000
80,500 $
34,500
UCC
0…
Chapter 1 Solutions
Principles Of Taxation For Business And Investment Planning 2020 Edition
Ch. 1 - Prob. 1QPDCh. 1 - Prob. 2QPDCh. 1 - Prob. 3QPDCh. 1 - Prob. 4QPDCh. 1 - Prob. 5QPDCh. 1 - A local government imposed a new 2 percent tax on...Ch. 1 - Prob. 7QPDCh. 1 - Prob. 8QPDCh. 1 - Prob. 9QPDCh. 1 - Prob. 10QPD
Ch. 1 - Prob. 11QPDCh. 1 - Prob. 12QPDCh. 1 - Prob. 13QPDCh. 1 - Prob. 14QPDCh. 1 - One way for the federal government to increase tax...Ch. 1 - The Internal Revenue Code and Treasury regulations...Ch. 1 - Mr. Josh Kenney, a U.S. citizen and resident of...Ch. 1 - Prob. 2APCh. 1 - Prob. 3APCh. 1 - This year, State A raised revenues by increasing...Ch. 1 - Prob. 5APCh. 1 - Prob. 6APCh. 1 - Prob. 7APCh. 1 - Prob. 8APCh. 1 - Prob. 9APCh. 1 - Mrs. Doyle, a resident of Rhode Island, traveled...Ch. 1 - Prob. 11APCh. 1 - Prob. 12APCh. 1 - Mr. and Mrs. Underhill operate a hardware store in...Ch. 1 - Prob. 14APCh. 1 - Wallis Company produces circuit boards in a...Ch. 1 - Prob. 1IRPCh. 1 - Prob. 2IRPCh. 1 - Bailey Company, which has offices in six states,...Ch. 1 - Prob. 4IRPCh. 1 - Yarrow Company orders 500,000 of office furniture...Ch. 1 - Acme Corporation was formed under the laws of...Ch. 1 - Prob. 7IRPCh. 1 - Prob. 8IRPCh. 1 - Prob. 9IRPCh. 1 - Mr. Imhoff, age 72, has lived in Los Angeles his...Ch. 1 - Prob. 1TPCCh. 1 - KTR Company earns a 10 profit on each unit of...
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- Tia Kline, a resident of Canada, is the sole shareholder of KI Inc. She plans to transfer four assets, which she owns, to KI Inc. in exchange for cash and preferred shares of KI Inc. She wishes to receive the maximum amount in cash that she can receive and still defer the recognition of income for tax purposes on the transfer of the assets. Tia and KI Inc. will jointly make a Section 85 election for each of the assets. The following chart outlines the details of the assets. UCC FMV $ 260,000 $ 22,500 50,000 100,000 ACB 52,000 30,000 60,000 0 $ 432,500 $ 142,000 $ Inventory Automobile Patent Customer list Inventory Automobile Patent Customer list $ Required: For each of the four assets individually, state the amount that should be elected as proceeds under Section 85 of the Income Tax Act, state the amount of cash consideration, and state the value of the preferred shares Ms. Kline should accept as consideration for the assets. $ FMV 260,000 $ 22,500 50,000 100,000 432,500 $ ACB $…arrow_forward5. Five unrelated U.S. individuals own all of the shares of Popping, a corporation organized and operating fully in the country Vivace. Mariam, one of the shareholders, asks you whether the income from Popping will be taxed to her immediately as earned; she believes the entity is classified as "a controlled foreign corporation (CFC)." Explain how the Federal income tax law applies to the profits earned by Popping. Use the correct Federal income tax terminology in your comments.arrow_forwardAccording to the contributions of Puerto Rico:Indicate the items of income that are part of the gross income.Indicates income exclusions.Calculate the adjusted gross income.Identifies if the taxpayer has interest income and explains what the tax treatment is in this regard.List the exemptions to which the taxpayer is entitled. Case 1: Carlos OrtizCarlos Ortiz is married and has an administrator position in a private company. Carlos' salary for this taxable year was $50,000. He received an inheritance of $80,000 and $12,000 in interest from a cooperative of which he is a member. Carlos files jointly with his wife, who is disabled and receives $12,000 in social security a year. The couple has a 15-year-old son, who is a student.arrow_forward
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