Note: unless otherwise stated, assume for the following questions involving nonliquidating distributions that (1) no contributed property was distributed, (2) all precontribution gain was recognized before the distribution, and (3) the distribution is pro rata.   Colin is a partner in a general partnership in which he has an outside basis of $56,000 at the end of the year (prior to any distributions). On December 31, Colin receives a proportionate nonliquidating distribution of $6,000 cash and property with a $14,000 fair value and an $8,000 basis to the partnership. How much gain or loss must Colin recognize, and what is his outside basis after the distribution?

Lisa and Richard wish to acquire Acacia Corp., a C corporation. As part of their discussions with Tobias, the sole shareholder of Acacia, they examined the business’ tax accounting balance sheet. The relevant information is summarized as follows:     Fair value Adjusted basis Assets:     Cash $30,000 $30,000 Equipment $70,000 $10,000 Building1 $260,000 $140,000 Land1 $410,000 $180,000 Total $770,000 $360,000       Liabilities:     Payables $20,000 $20,000 Mortgage1 $150,000 $150,000 Total $170,000 $170,000   1 Mortgage is attached to the building and the land.   Tobias’ basis in the Acacia stock is $400,000. Lisa and Richard offer to pay Tobias $900,000 for his company.   [question 3 of 4] How much gain or loss must Acacia recognize if the transaction is structured as a direct asset sale to Lisa and Richard (and they assume Acacia’s liabilities)?

Jerry owns all the stock of Silverbell Corp., an S corporation. Jerry’s basis for the 100 shares is $10,000. On August 25 of this year (assume August is the 237th day of the year, a non-leap year), Jerry gifts 30 shares of stock to his older sister. Silverbell reports $400,000 of ordinary income this year. How much income is allocated to Jerry?

Nicole and Paula each own 50 percent of Magnolia, an S corporation. Magnolia reported the following revenues and expenses:   Sales revenue – $720,000 Cost of goods sold – ($200,000) Depreciation expense (MACRS) – ($12,000) Sec. 179 expense – ($44,000) Long-term capital gains – $8,000 Qualified dividends – $5,000 Nontaxable interest income – $3,000 Salary to owners – ($120,000) Employee wages (excluding salaries to owners) – ($50,000)   In addition, Nicole and Paula each received distributions of $10,000 from Magnolia.   (1) How much ordinary business income is allocated to Nicole?   (2) What are the separately stated items allocated to Nicole?   (3) If Nicole’s basis in her Magnolia stock at the beginning of the year was $40,000, what is her basis after considering the above items?

Lisa and Richard wish to acquire Acacia Corp., a C corporation. As part of their discussions with Tobias, the sole shareholder of Acacia, they examined the business’ tax accounting balance sheet. The relevant information is summarized as follows:     Fair value Adjusted basis Assets:     Cash $30,000 $30,000 Equipment $70,000 $10,000 Building1 $260,000 $140,000 Land1 $410,000 $180,000 Total $770,000 $360,000       Liabilities:     Payables $20,000 $20,000 Mortgage1 $150,000 $150,000 Total $170,000 $170,000   1 Mortgage is attached to the building and the land.   Tobias’ basis in the Acacia stock is $400,000. Lisa and Richard offer to pay Tobias $900,000 for his company.   [question 2 of 4] How much gain or loss must Tobias recognize if the transaction is structured as a stock sale to Lisa and Richard?

Lisa and Richard wish to acquire Acacia Corp., a C corporation. As part of their discussions with Tobias, the sole shareholder of Acacia, they examined the business’ tax accounting balance sheet. The relevant information is summarized as follows:     Fair value Adjusted basis Assets:     Cash $30,000 $30,000 Equipment $70,000 $10,000 Building1 $260,000 $140,000 Land1 $410,000 $180,000 Total $770,000 $360,000       Liabilities:     Payables $20,000 $20,000 Mortgage1 $150,000 $150,000 Total $170,000 $170,000   1 Mortgage is attached to the building and the land.   Tobias’ basis in the Acacia stock is $400,000. Lisa and Richard offer to pay Tobias $900,000 for his company.   [question 4 of 4] How much gain or loss must Tobias recognize if the transaction is structured as a direct asset sale and Acacia distributes all its after-tax proceeds to Tobias in liquidation of his stock? (assume a 21 percent corporate tax rate)

Owen owns all the stock of Spruce, an S corporation. At the beginning of 2024, Owen’s basis in his Spruce stock was $14,000. During 2024, Owen loaned $20,000 to the corporation and it reported a ($25,000) ordinary business loss and no separately stated items. In 2025, Spruce reported $8,000 of ordinary business income. What is Owen’s stock and debt basis at the end of 2025?

Poplar Corp. has always been an S corporation shareholder. On December 31, Poplar made a nonliquidating distribution of $10,000 cash to Walter, its sole shareholder. What amount and character of gain or loss must Walter recognize on the distribution if his basis in the Poplar stock is $12,000? How does your answer change if Walter’s basis is instead $6,000?

Why are you taking CHEM 1412 this semester?

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