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TAX HOMEWORK
TAX HOMEWORK
Gail and John decide to form a new corporation called Titans Corporation.
Gail transfer property with a basis of $25,000 and a current value of $200,000 in exchange for 50 shares of Titans Corporation. John transfers property with a basis of $50,000 and a current value of $165,000. John also will provide accounting and tax services to Titans Corporation. John receives 50 shares in the new Titans Corporation. The value of John’s services provided is $35,000.
What is Titan’s basis in the property transferred by Gail and John?
Jerome Howard exchanges property with a basis of $300,000 and a fair market value of $900,000 for 70% of the stock of Stooges Corporation. The other 30% of the stock is owned by Jules White who acquired his stock several years ago.
You are a CPA in private practice and Jerome comes to you and asks you whether he must report a gain on the transfer on his tax return.
Please draft a letter to your client Jerome and an associated memo to the tax files with documentation for your response.
Your memo to the files should incorporate the following sections:
FACTS
ISSUES
LAW & ANALYSIS
CONCLUSION
What gain or income do Gail and John recognize on the exchange?
Must Jerome Howard report a gain or a loss on the transfer on his tax return.?
Please state whether or not you agree with this proposition and fully explain your rationale
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*** ************ and John ****** to **** * new corporation ****** ****** *************** ******** property **** * ***** of ****** *** a ******* ***** ** ******* ** ******** *** ** shares ** Titans Corporation **** transfers ******** **** * ***** ** ****** *** a ******* ***** ** ******* John also **** ******* ********** *** *** ******** to ****** *********** **** ******** 50 ****** ** the *** ****** *********** *** value ** John’s services ******** is ********** **** or ****** ** **** *** **** recognize ** the ******************** * *** $1250000Profit ****** * ********* ******** * ************ ***** ******************* x *** * ************* ****** * $ ******* **** ******** ******** ************ ***** ************ ** ********* ***** ** *** ******** *********** by **** *** ****** ******* $50000= $ ******** **** ***** treat *** value ** *** ********** ******** rendered ** ********** **** treat the ********** ******** rendered by **** ** ************ ******** **** **** help in *** growth *** *********** ** *** ************** ****** exchanges property with a ***** ** $300000 *** * **** ****** value ** ******* *** *** ** the ***** ** ******* Corporation The other *** of *** ***** ** owned by ***** ***** who acquired *** ***** several ***** *** *** *** * CPA in ******* ******** *** ****** ***** to *** and **** *** ******* ** **** ****** * **** ** the ******** ** *** *** returnPlease draft * ****** ** **** client Jerome *** ** ********** memo ** *** tax files **** ************* *** your responseYour **** to *** files ****** *********** *** ********* *********************** ***** ANALYSISCONCLUSIONa)Letter PRIVATE ******** *********** ** BOX 56482-100022 NEY **** ************* ****** HowardStooges ************* *** *************** YorkDear ****** **** REPORT ON *** ******** ** YOUR *** **************** **** ******* I ****** ****** you **** *** should be prepared\ ** ****** any ********* **** may **** **** *** *********** the **** **** ** ** difficult to ******* whether *** **** get a gain ** * loss ** **** exchange ***** *** *** *** **** *** ***** ** the ****** conditions ********* * advise *** ** take **** **** ************* ** Jules ***** who ******** *** ***** several ***** *** ** ********* ** **** you have * ******** ****** **** **** ** contact meYours SincerelyBrain ********* ******* PRACTICE b)MemoTO: FileFrom: ***** JonnesRE: ****** ****** **** Year 2016)FactsJerome Howard ** * ******* ** this ******* *** *** ****** at ******* practice *********** *** *** ******* ** ******** ********* ****** ****** exchanges property **** * ***** ** ******* *** * fair market ***** ** $900000 *** *** ** *** ***** ** ******* *********** ** ***** ****** Howard *** ********* *** he wondered whether he *** **** a ***** ******** ******** in **** ** exchange business Though he ********* * loss ** ***** *** ***** ******** ** started ****** * gain ** *** exchange ** *** ******** *** **** ** **** ** ******** the ***** of ****** * **** ** ***** **** idea of ********** *** ******** **** Stooges **************************** ** the ****** trends It ** ********* ** ********* whether there will ** * **** or a **** ** *** shares ***** by Jerome ****** *** ****** ****** ***** making ********* profits ***** * short ****** **** **** **** ******* *** ****** ****** **** * loss ** exchange is *** ********** for ****** *** directly ** ********** *** more than 50% of *** ********** *** ************** Jerome ****** ****** * **** ** a **** ** *** ******** on *** *** ********** ** is important ** ** prepared *** * **** ** ***** time *** ** **** ** ****** ********* ** *** market trends but *** ****** ** sure of ********* ******* ***** *** **** studied the market conditionsC1 **** *** **** the *** **** ****** the *** of **** **** ****** **** ************ a corporationPlease state ******* or *** *** agree with **** *********** *** ***** explain your ********** agree **** **** ********** ** that *** code ** easy ** **** *** *** ***** ** ** *** *********** **** *** ****** ******* *** electorate since ***** ******* ********* policy trade-offs ******* encouraging ****** and ensuring equity *** **** ********** *** families have ******** their ******** ****** ******** *** ***** Please state ******* or *** *** ***** with the assertion that ** terms ** ************* *** ****** ******* *** incorporations *** ******* **** ********* exchanges *** **** alike I ******* ***** **** *** **** **** ** ***** ** ************* *** ****** ******* *** ************** and ******* **** ********* ********* *** **** alike ******* ***** ******* *** ** loss ** **** ** ********** ******** you receive **** ***** ** ******** *** property and *** ****** in ******* ** the *********** *********** ***** the exchange ***** ** section **** ** ****** an investor ** **** an ********** ******** *** ******** * replacement ********** ******** and *** *** ***** *** capital **** *********
