Acc 553 Week 4

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4. What is the purpose of Code Sec. 351 in regard to transfers to corporations?
Code Sec. 351 provides for nonrecognition of gain or loss upon transfer of property to a corporation in return for its stock. (Smith) Because it is thought of as just an exchange in form of investment, without gain/loss, the government does not want people to stop investing in corporations because of being taxed on an exchange of investment.

20. What tax years are available to corporations? How do the options differ from other forms of business organizations?
A corporation can have a calendar (January-December) or a fiscal year (any consecutive 12 month period). “A regular corporation can elect a fiscal period different from that of its owners. A sole proprietorship must have the same fiscal period as its owner. A partnership must have the same fiscal period as its partners who have a majority interest. In general, an S corporation must use a calendar year as its tax year unless it can establish a business purpose for using another tax year.” (Smith)

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 may claim capital losses only against capital gains. (Smith)

55. Susan Sweets is a 40 percent shareholder in Acclaim Inc., a theatrical supplies company. She transfers a fully depreciated car with a value of $2,000 to the corporation, but does not receive any consideration for it.
a. What are the tax consequences to Susan?
There are no tax consequences to Susan. She does not recognize a loss or a gain on the transaction.
b. What are the tax consequences to the corporation?
The corporation must recognize a $2,000…...

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