On January 2, Chaz transfers cash of $104,200 to a newly formed corporation for
ID: 2468600 • Letter: O
Question
On January 2, Chaz transfers cash of $104,200 to a newly formed corporation for 100% of the stock. In its initial year, the corporation has net income of $26,050. The income is credited to its earnings and profits account. The corporation distributes $7,815 to Chaz. If an amount is zero, enter "0".
a. Chaz has a taxable divident of $_____. and the corporation has a deduction of $0.
b. Assume, instead, that Chaz transfers to the corporation cash of $52,100 for stock and cash of $52,100 for a note of the same amount. The note is payable in equal annual installments of $5,210 and bears interest at the rate of 6%. No distributions are made during the year to Chaz. However, at the end of the year, the corporation pays an amount to meet the loan obligation.
Chaz has interest of $_____ and a note repayment of $_____ of which $_____ is taxable to Chaz. The corporation has a deduction of $_____.
Explanation / Answer
a. Chaz has a taxable divident of $ 0 and the corporation has a deduction of $0.
b. Assume, instead, that Chaz transfers to the corporation cash of $52,100 for stock and cash of $52,100 for a note of the same amount. The note is payable in equal annual installments of $5,210 and bears interest at the rate of 6%. No distributions are made during the year to Chaz. However, at the end of the year, the corporation pays an amount to meet the loan obligation.
Chaz has interest of $3,126 and a note repayment of $5,610 of which $3,126 is taxable to Chaz. The corporation has a deduction of $ 3,126
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.