Category: Writing

Helen and Helga are equal partners in the HH Partnership.
However, Helen devotes most of her time managing the business and believes that
she should be given additional compensation in the form of a guaranteed
payment. Currently, the partnership is operating at a break -even point (i.e.,
zero ordinary income and no separately stated items of income or loss). The
basis of each partner’s partnership interest also is negligible. Helen has
requested a $40,000 guaranteed payment as compensation for her additional
efforts. What tax issues should Helen and Helga consider?

Bert and Jose plan to combine their unincorporated
businesses by forming a partnership. Bert has substantially appreciated
business assets. Moreover, if he transfers all the business’ liabilities and
assets, the liabilities will exceed the adjusted basis of the assets but not
their FMV. Jose will render services to the entity in addition to transferring
his business assets. What tax issues should Bert and Jose consider?

a. Brett Nelson transfers a building having a $75,000 FMV
and a $30,000 adjusted basis to Gator Corporation . An advantage of the asset
transfer under Sec. 351 is that Brett can defer his $45,000 ($75,000 FMV –
$30,000 adjusted basis) realized gain. What disadvantages accrue co Gator as a
result of the pose-transfer aspects of the transaction?
b. Assume the same facts as in Pare a except char the
building’s FMV is instead $30,000 and its adjusted basis is $75,000. What tax
disadvantage results from the transfer as presently structured? Are there any
suggest ions char you can offer co Brett to improve his tax benefits?
c. Explain why the basis of gain property chat is
contributed to a corporation in a Sec. 351 exchange is not equal co its FMV on
the date of the exchange. ls the basis of the property chat is contributed co
the corporat ion adjusted when gain is recognized by the transferor?
d. How would your answers to Part a change if Brett Nelson
transferred a $25,000 mortgage along with the land and received stock having a
value less than the amount of the liability?

Assume the same facts as in Problem 1:17-33 except Barry and
Bart instead are considering the treatment of fringe benefits. Barry and Bart
want to provide group term life insurance and accident and health insurance for
themselves and their employees and plan ro make the premium payments from
business funds. Explain any restrictions that apply to each form of business
organization.

Acme Corporation is a highly profitable closely held
corporation that has never paid a dividend. During the past five years,
after-tax earn ings of $200,000 per year have been reta ined in the business.
All of the earnings ($1 million) have been reinvested in operating assets and
to finance an expansion of the business. ls the corporation sub – ject to the
accumulated earnings tax because no dividends have been paid?

Jose owns a 60% interest in the JKL Partners hip. What are
the amount and character of the recognized gain or loss in each of the
following situations?
a. Jose sells common stock held as an investment with a
$1,000 adjusted basis and a $3,000 FMV to the partnership. Jose held the stock
for more than one year as an investment before the sale. The partnersh ip also
held the stock as an investment after the sale.
b. Jose sells a parcel of land held for investment purposes
with a $10,000 adjusted basis and a $25,000 FMV to the partnership. The land is
used in the partners hip’s business.
c. The partnership sells Jose a building used in its
business with a $100,000 adjusted basis and a $60,000 FMV.