Project 2 Ac553

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14-4 What is the purpose of Code Sec. 351 in regard to transfers to corporations? Solution To avoid the deterrent when there is no change in wherewithal to pay, because the government does not want to discourage corporate formation. Under this code there is no gain or loss recognized upon transfer as long as the transferor is in control of the corporation immediately afterwards. 14-20 What tax years are available to corporations? How do the options differ from other forms of business organizations? Solution Upon establishing a new corporation, the corporation may choose either a calendar year or a fiscal year. They may choose either of the two regardless of the tax years of its owners which creates tax savings. This differs from other forms of business organizations, S corporations are required to use the calendar year unless they can establish a business purpose to use a fiscal year. Partnerships has to have the same tax year as their partners who have a majority interest unless there isn’t one then they use the same year of all its principle partners, unless none exists then the least aggregate deferral method must be used unless the partnership can establish a business purpose to use the fiscal year. 14-22 What are the differences in the treatment of capital gains and capital losses of corporations and of individuals? Solution Corporations cannot take deductions for net capital losses in the year in which they occur and can never use net capital losses to reduce ordinary income. Corporate taxpayers may use capital losses against capital gains; however losses can be carried back. Individuals can use net capital losses to reduce ordinary income and against capital gains. 14-52 Sam Rogers forms a corporation. Sam transfers to the corporation property having a basis to him of $15,000 and a fair market value of $27,000 for 900 shares of the $10 par stock

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