Source: https://matthewminer.name/law_stuff/outlines/2L/2nd+Semester/LAW+641-001+%E2%80%93+Taxation+of+Businesses/Problem+Answers
Timestamp: 2019-04-23 10:57:25+00:00

Document:
Holding Time: When inventory purchased?
Holding Time: When equipment purchased?
C's holding period is ...?
Holding Period: When stock purchased?
It would be 80% ($20,000 ÷ $25,000) ordinary gain and 20% capital gain.
When the property was already being used for the business and the debt incurred therefor or when the value of the property is greater?
Ann recognizes $5,000 in capital gains from qualified dividend income, her basis in her stock is reduced to $0, and she recognizes $2,500 in gain from sale of the stock.
Pelican accumulates no earnings and profits.
Ann recognizes $10,000 in capital gains from qualified dividend income.
Pelican neither depletes nor accumulates any earnings and profits. It remains $15,000.
Ann recognizes $11,500 gain on the sale of her stock to Baker; she recognizes $12,000 in capital gains from qualified dividend income; and her basis in her stock is reduced by $3,000 to $7,000, which was then halved to $3,500 during the sale.
Zane always gets a basis equal to the fair market value.
Zane recognizes $20,000 in capital gains from qualified dividend income because of the accumulated earnings.
Sturdley recognizes $9,000 in gain under 26 U.S.C. § 311(b); and its earnings and profits are decreased by $11,000, under 26 U.S.C. § 312(b), leaving $14,000.
Zane's basis in his stock is reduced to $0, and he recognizes $12,000 in gain from sale of the stock.
Sturdley recognizes $9,000 in gain under 26 U.S.C. § 311(b); and accumulates no earnings and profits.
Zane recognizes $4,000 in capital gains from qualified dividend income because of the accumulated earnings.
Sturdley recognizes $9,000 in gain under 26 U.S.C. § 311(b); and its earnings and profits are decreased by $27,000, under 26 U.S.C. § 312(b)–(c), leaving $0.
This is really confusing, so I'm just guessing. Lemme know what the right answer is.
Zane recognizes $20,000 in capital gains from qualified dividend income.
Sturdley does not recognize gain or loss because of 26 U.S.C. § 311(a), and its earnings and profits are decreased by $30,000 because of 26 U.S.C. § 312(a), leaving $10,000.
When Sturdley sells the land, it recognizes $10,000 of loss, and its earnings and profits are decreased by $10,000. When it distributes the proceeds, its earnings and profits are further reduced by $20,000, leaving $10,000 in earnings and profits.
The estate lost 0% of its portion of the voting stock, thus it is not substantially disproportionate under 26 U.S.C. § 302(b)(2)(c). Thus, $4,000,000 of the redemption is treated as a dividend out of its accumulated earnings and profits. $2,050,000 is treated as a recovery of basis, first $50,000 of the preferred stock, then $2,000,000 of the common stock.
None are a substantially disproportionate redemption under 26 U.S.C. § 302(b)(2).
Pamela and Mike both received distributions as a partial liquidation under 26 U.S.C. § 302(e) because of 26 U.S.C. § 304. This is therefore in exchange for their stock under 26 U.S.C. § 302(a), so they have gain in the amount that one-third of Books's assets is greater than each's basis.
Iris receives Books's assets as a dividend, so it has a 65% dividends received deduction according to 26 U.S.C. § 243, and its basis would be reduced under 26 U.S.C. § 1059(e)(1).
Alpha has 26 U.S.C. § 311(b) gain.
It would no longer be a partial liquidation because three years is not enough to become a qualified trade or business under 26 U.S.C. § 302(e)(3). It would therefore be dividend under 26 U.S.C. § 302(d), 26 U.S.C. § 301, and 26 U.S.C. § 316.
Iris would still have a 65% DRD, but would no longer have a basis reduction under 26 U.S.C. § 1059(e)(1).
Did not cease operation so not a partial liquidation according to 26 U.S.C. § 302(e)(2).
26 U.S.C. § 302(b)(3) complete termination if he waives family attribution if he resigns directorship. Is 26 U.S.C. § 302(b)(4) partial liquidation.
Liquidating Beta is not a taxable transaction under 26 U.S.C. § 332 & 26 U.S.C. § 337, so it is a qualified trade or business under 26 U.S.C. § 302(e)(3), so it is a partial liquidation under 26 U.S.C. § 302(4), so it is in exchange for the stock.
X has no 26 U.S.C. § 311(b) gain as it's distributing cash.
A has 26 U.S.C. § 302(b)(2) redemption and SDR.
A has 26 U.S.C. § 1001 gain.
X's E&P is reduced under 26 U.S.C. § 312(n)(7).
Eligible because of the family rule in 26 U.S.C. § 1361(c)(1).
At A's death it is still eligible, but when it is distributed to F, it becomes ineligible.
Eligible as QSST even after SS dies.
S Corps don't pay taxes. They make their sharholders do it for them.
Dewey has his basis reduced to $2,000. Milt has his basis reduced to $3,000.
Dewey has $1,000 stock sale gain. Milt has $3,000.
Nobody would actually do this.
The 1k loss is gone forever. The 3k gain will either be capital gain or 1231 gain, but both are separately-stated items, so they will flow through proportionally. Dewey's basis would be increased to $8,000, and then reduced to $0 by the distribution to him.
No § 311(b) gain. Just like problem (b).
Long-term capital gain would be a separately-stated item, split $2,000 each.
P Corp has $10,000 AAA. ($6,000 + $4,000) This gets wiped out.
$5,000 AAA is applied against each's distribution, meaning no taxing or change in basis.
P Corp has $10,000 AAA and $6,000 E&P, but both are wiped out.
$5,000 AA is applied against each's distribution. $3,000 E&P is applied against each's distribution, giving each a dividend of $3,000. Then $4,000 is applied against each's basis, reducing Opal's to $1,000 and wiping out Nancy's (as well as giving her $31,000 stock sale gain).
Distribution is $7,000 under 1368(b) though? and there's $2,000 under 1368(c)?
Generated 10 AAA in current year, and carried all over cuz no distributions. So Rose has $6,000 distribution, $5,000 out of AAA and $1,000 as a dividend out of E&P.
A realized $70,000 gain, but recognized $0 because of 26 U.S.C. § 721. His adjusted basis is $30,000 under 26 U.S.C. § 722. His holding period is fully tacked on, assuming it has been held for more than a year because, although it is not a capital asset under 26 U.S.C. § 1221(1)(2), it is a 26 U.S.C. § 1231 asset.
B realized $50,000 gain, but recognized $0 because of 26 U.S.C. § 721. His adjusted basis is $50,000 under 26 U.S.C. § 722. His holding period is divided and 50% tacked on, assuming it has been held for more than a year because, although it is not a capital asset under 26 U.S.C. § 1221(1)(2), it is a 26 U.S.C. § 1231 asset. The note is a capital asset. The equipment is a 26 U.S.C. § 1231 asset, except for the 26 U.S.C. § 1245 gain, which is just ordinary gain.
C realized $50,000 gain, but recognized $0 because of 26 U.S.C. § 721. His adjusted basis is $50,000 under 26 U.S.C. § 722. His holding period is divided and 70% tacked on, assuming it has been held for more than a year because 70% of the fair market value, although not a capital asset under 26 U.S.C. § 1221(1)(2), is a 26 U.S.C. § 1231 asset.
D realized and recognized $0 gain. His adjusted basis is $100,000 under 26 U.S.C. § 722. His holding period is not tacked on so it begins on the date of transfer.
The partnership recognizes no gain and just takes the partners' bases.
LP is at risk for $10,000 for the R&D, as that is the amount of cash he contributed and nonrecourse debt is not at-risk, so that is the maximum amount of loss allowed for it. He therefore recognizes $13,000 in gain after combining the movie's $25,000 gain with the R&D loss, raising his basis to $53,000.
$70,000 gets through §704(d), $65,000 through §465, and $30,000 though §495, allocated proportionally as limited by §495 (~$4,620 for the movie, ~$6,920 for the equipment, and ~$18,460 for the R&D).
LP's basis would be $0 in the movie limited partnership, $80,000 for the equipment LLP, $30,000 more than the initial for the real estate limited partnership, and $20,000 for the R&D limited partnership.
$15,000 loss would be suspended under §704(d) and ~$5,380 under §469 for the movie, $5,000 under §465 and ~$8,080 under §469 for the equipment, and ~$24,540 under §469 for the R&D.

References: § 311
 § 312
 § 311
 § 311
 § 312
 § 311
 § 312
 § 302
 § 302
 § 302
 § 304
 § 302
 § 243
 § 1059
 § 311
 § 302
 § 302
 § 301
 § 316
 § 1059
 § 302
 § 302
 § 302
 § 332
 § 337
 § 302
 § 302
 § 311
 § 302
 § 1001
 § 312
 § 1361
 § 311
 § 721
 § 722
 § 1221
 § 1231
 § 721
 § 722
 § 1221
 § 1231
 § 1231
 § 1245
 § 721
 § 722
 § 1221
 § 1231
 § 722
 §704
 §465
 §495
 §495
 §704
 §469
 §465
 §469
 §469