During the current year, TLM Corporation sells a tract of land for $125,000. The
ID: 2551539 • Letter: D
Question
During the current year, TLM Corporation sells a tract of land for $125,000. The sale is made to Sara, TLM Corporation's sole shareholder. TLM Corporation originally purchased the land five years earlier for S140,000. Read the Requirement a hat is he amount o gain or loss at TLM Corporation will recognize on the sale durin the current year? For a gain or loss with a zero value, e ter ? The realized is s. The amount recognized is s Requirement b. Assume that in the following year, Sara sells the land for $130,000. What is the amount of gain or loss Sara will recognize? What are the tax consequences to TLM Corporation upon the subsequent sale by Sara? What is the realized gain or loss and the amount that Sara will recognize? (For a gain or loss with a zero value, enter SO.) The realized The amount recognized is What are the tax consequences to TLM Corporation upon the subsequent sale by Sara? O A. The unused loss can be recognized in the current year OB. There are no tax consequences to TLM Corporation upon the subsequent sale by Sara. O C. The gain must be recognized by TLM Corporation in the current year ? D. The unused loss can be carried over to the next year. Requirement c. Assume that in the following year, Sara sells the land for $119,000. What is the amount of gain or loss Sara will recognize? (For a gain or loss with a zero value, enter SO.) s Sare vil recgnien the curent yea The realized subject to any other applicable limitations. Requirement d. Assume that in the following year, Sara sells the land for $142,000. What is the amount of gain or loss Sara will recognize? (For a gain or loss with a zero value, enter So.) The realized subject to any other applicable limitations. in the current yearExplanation / Answer
A. TLM corporation does not recognize any loss or gain on the sale of the land. This is a related party transaction. TLM corporation has a loss of $15000(140000 - 125000), but it is disallowed.
B. Sara will not have a reportable gain or loss. Sara's gain is 5000 (130000-125000), but Sara is allowed to deduct the loss disallowed to TLM corporation (15000) but not below 0. TLM corporation has no tax consequence.
C. Sara may recognize a loss of 6000(125000 - 119000). Sara cannot take TLM corporation's disallowed loss.
D. Sara will recognize a gain of $2000(142000 - 140000). Sara has a gain of 17000(142000 - 125000), but is allowed to deduct TLM corporation's disallowed loss to the extend of its gain.
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