Questions from Federal Taxation

Q: Bob owns 60 of the 100 outstanding shares of Dazzle Corporation stock

Bob owns 60 of the 100 outstanding shares of Dazzle Corporation stock and 80 of the 100 outstanding shares of Razzle Corporation stock. Bob’s basis in his Dazzle shares is $12,000, and his basis in hi...

Q: Jane owns 150 of the 200 outstanding shares of Parent Corporation stock

Jane owns 150 of the 200 outstanding shares of Parent Corporation stock. Parent owns 160 of the 200 outstanding shares of Subsidiary Corporation stock. Jane sells 50 shares of her Parent stock to Subs...

Q: When the IRS audited Winter Corporation’s current year tax return, the

When the IRS audited Winter Corporation’s current year tax return, the IRS disallowed $10,000 of travel and entertainment expenses incurred by Charles, an officer-shareholder, because of inadequate do...

Q: Scott and Lynn Brown each own 50% of Benson Corporation stock

Scott and Lynn Brown each own 50% of Benson Corporation stock. During the current year, Benson made the following distributions to its shareholders: Benson had E&P of $250,000 immediately before...

Q: Bruce and Bob organize Black LLC on May 10 of the current

Bruce and Bob organize Black LLC on May 10 of the current year. What is the entity’s default tax classification? Are any alternative classification(s) available? If so, (1) how do Bruce and Bob elect...

Q: What are the advantages of Sec. 1244 loss treatment when a

What are the advantages of Sec. 1244 loss treatment when a stock investment becomes worthless? What conditions must be met to qualify for this treatment?

Q: John and Jean own 80% and 20%, respectively, of

John and Jean own 80% and 20%, respectively, of Plum Corporation stock. Thanks to their hard work, Plum’s software sales have sky rocketed. In its first year of operation Plum’s earnings were minimal,...

Q: Sara owns 60% of Mayfield Corporation’s single class of stock.

Sara owns 60% of Mayfield Corporation’s single class of stock. A group of five family members and three key employees own the remaining 40%. Mayfield is a calendar year taxpayer that uses the accrual...

Q: Fifteen years ago, husband and wife Stuart and Marsha Widell organized

Fifteen years ago, husband and wife Stuart and Marsha Widell organized Widell Engineering Associates (WEA), a Delaware corporation that builds, repairs, and manages waste treatment plants throughout t...

Q: John owns all 100 shares of stock in Jamaica Corporation, which

John owns all 100 shares of stock in Jamaica Corporation, which has $100,000 of current E&P. John would like to receive a $50,000 distribution from the corporation. Jamaica owns several assets that it...