Kaplan AC507 Unit 6 Assignment Latest

AC507

Unit 6 Assignment

Chapter 11

21.  John Mason operates a consulting business, Mason Enterprises, as a sole proprietorship. He had to transfer $100,000 of stocks and securities into Mason Enterprises’s name to show financial viability for the business. During the current year, the business had the following income and expenses from operations:

Consulting revenue

$125,000

Travel expenses

40,000

Transportation

3,000

Advertising

7,000

Office expense

3,000

Telephone

1,000

Dividend income

5,000

Interest income

2,000

Charitable contribution

1,000

Political contribution

6,000

Determine the Schedule C net income. How are items not included in the Schedule C net income reported?

27. John received a proportionate nonliquidating distribution of $10,000 cash and inventory with a zero basis and a fair market value of $12,000 from a partnership in which he has a basis of $8,000.

a. What are the tax effects of these distributions?

b. How would your answer change if this was a liquidating distribution?

c. How would your answers change on the nonliquidating and liquidating distributions if his basis in the partnership was $15,000?

48. During the current year, Biggie, Inc., a delivery company operating as an S corporation, reported the following results from operations:

Revenue

$280,000

Salaries

130,000

Truck expense

30,000

Taxes

18,000

Section 1231 loss

8,000

Traffic fines

1,200

Interest expense on truck loans

2,000

Interest income (corporate bonds)

500

What are the corporation’s net income and its separately reported items?

57. An S corporation shareholder is currently in the 28 percent tax bracket. His S corporation is going to pass a very large loss through to him that would otherwise offset other income, except for the fact that he lacks sufficient stock basis to absorb the loss. The shareholder is coming to your office tomorrow to discuss the situation. Make a list of questions you will ask before you will advise him on possible alternatives.