Questions from General Taxation

Q: Falcon Corporation, a calendar year taxpayer, is a deepwater offshore

Falcon Corporation, a calendar year taxpayer, is a deepwater offshore drilling company that is planning to sell drilling equipment that it no longer needs. The drilling equipment has an adjusted basis...

Q: Heron Corporation has been in operation for 10 years. Since Heron’s

Heron Corporation has been in operation for 10 years. Since Heron’s crea- tion, all of its stock has been owned by Andy, who initially invested $200,000 in the corporation. Heron has been successful f...

Q: Two sisters and their brother, all unmarried, own and operate

Two sisters and their brother, all unmarried, own and operate a dairy farm. They live on the farm and take their meals there for the “convenience of the employer.” The fair market value of their lodgi...

Q: A business entity has four equal owners. Its taxable income before

A business entity has four equal owners. Its taxable income before the cost of certain fringe benefits paid to owners and other employees is $400,000. The amounts paid for these fringe benefits are re...

Q: Turtle, a C corporation, reports taxable income of $300

Turtle, a C corporation, reports taxable income of $300,000 before paying salaries to the three equal shareholder-employees, Britney, Shania, and Alan. Turtle follows a policy of distributing all afte...

Q: Parrott, Inc., a C corporation, is owned by Abner

Parrott, Inc., a C corporation, is owned by Abner (60%) and Deanna (40%). Abner is the president, and Deanna is the vice president for sales. Parrott, Abner, and Deanna are cash basis taxpayers. Late...

Q: Laurie Gladin owns land and a building that she has been using

Laurie Gladin owns land and a building that she has been using in her sole proprietorship. She is going to incorporate her sole proprietorship as a C corporation. Laurie must decide whether to contrib...

Q: Dan and Patricia form Crane Corporation. Dan transfers land (worth

Dan and Patricia form Crane Corporation. Dan transfers land (worth $200,000, basis of $60,000) for 50% of the stock in Crane. Patricia transfers machinery (worth $150,000, adjusted basis of $30,000) a...

Q: Marci and Jennifer each own 50% of the stock of Lavender

Marci and Jennifer each own 50% of the stock of Lavender, a C corporation. After each of them is paid a “reasonable” salary of $150,000, the taxable income of Lavender typically is about $800,000. Th...

Q: Since Garnet Corporation was formed five years ago, its stock has

Since Garnet Corporation was formed five years ago, its stock has been held as follows: 525 shares by Frank and 175 shares by Grace. Their basis in the stock is $350,000 for Frank and $150,000 for Gra...