What is the purpose of Code Sec. 351 in regard to transfers to corporations? 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. Question 14-20
What tax years are available to corporations? How do the options differ from other forms of business organizations? When 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 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. Question 14-22
What are the differences in the treatment of capital gains and capital losses of corporations and of individuals? Unlike individuals, corporations may not take a deduction for net capital losses in the year in which they occur. The net capital loss can never be used to reduce ordinary income. Corporate taxpayers can claim capital losses only against capital gains. Individuals may claim up to $3,000 in capital losses against other forms of income. Corporate capital loss carryovers become short-term losses regardless of their original status, and they are carried back three years, forward five years Problem 14-55
Susan Sweets is a 40 percent shareholder in Acclaim Inc., a theatrical supplies company. She transfers a fully depreciated car with a value...
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