Chap 14 hw
Code section 351 permits shareholders of a corporation to defer recognition of a gain or loss on the transfer of assets to the corporation. The transfer of property may be made when a new corporation is formed or may reflect additional capital contributions to an existing corporation. Without Section 351, a sole proprietorship or a partnership would have difficulty adopting the corporate form of organization for legal and/or tax purposes because the transfer of appreciated property would constitute a taxable transaction in a recognized gain.
C Corporations can elect any month end for their tax year.
S Corporations, all Partnerships, Limited Liablity Companies/Partnerhips are required to to use a calendar year. These pass-through entities can make an election to file on a fiscal year if they meet certain requirements. In almost cases, these entities are on a calendar year basis.
A Corporation is not taxed at a favorable tax rate on the capital gains as is the case with the individuals.
A corporation can deduct capital losses only up to the amount of its capital gains.
For an individual, you must first separate your long term and short term gains and losses. Once this is done, it is then netted as either a net gain or loss. If you have net short-term losses or long-term losses (or both), you can use the losses to offset ordinary income, subject to a limit. The maximum annual deduction against ordinary income for the year is $3,000. Long term capital gain will be subject to tax at favorable tax rates for individuals.
A) No tax consequences
B) No tax consequences
C) Since Susan is not in control of the corporation, Sec 351 rules will not apply and she will have to recognize gain.
Since losses sustained during the taxable year from sales or exchanges of capital assets, their taxable income is $62,000.