ACCT 403-Indicate in the space provided whether the following

ACCT 403-Indicate in the space provided whether the following

403 – Case Four – Fall Quarter 2012 (Due 10/22/12)This case will assess your understanding of some key aspects of various nontaxable exchanges. This casedoes not have to be typed. Simply fill in the blank spaces with the appropriate word or amount.1.Indicate in the space provided whether the following transactions qualify as a like-kind exchange forboth parties. If it does qualify for both parties, indicate “yes” in the blank space; otherwise, indicate“no.” Assume in all cases that the recipient party will hold the property they receive for eitherinvestment or business purposes. (1 point each)_____ (a)_____ (b)Inventory held for resale to customers is exchanged for equipment used in themanufacturing process of a business._____ (c)U.S. ranchland held as a business is exchanged for U.S. farmland held as a business._____ (d)U.S. ranchland held as a business is exchanged for ranchland in Poland held as abusiness._____ (e)Undeveloped U.S. realty held as an investment is exchanged for an apartment buildingin the U.S. held for investment._____ (f)2.Stock held as an investment in McDonald’s Corporation is exchanged for a McDonald’sfranchise held as a business.A rancher swaps a bull used for breeding purposes for a breeding heifer.In a qualifying like-kind exchange, Kris exchanges equipment with an adjusted basis of $130,000 anda fair market value (FMV) of $100,000 for $3,000 in cash and other equipment worth $97,000. (2points each)(a)(b)Kris’ recognized gain (loss) (RN/G(L) from the exchange is $_______________. (If a loss,you must put brackets around your answer.)(c)3.Kris’ realized gain (loss) (RZ/G(L)) from the exchange is $_______________. (If a loss, youmust put brackets around your answer.)Kris’ basis in the new equipment received in the exchange is $_______________.In a qualifying like-kind exchange, Quinn exchanges investment land with an adjusted basis of$25,000 and a FMV of $100,000 for $20,000 in cash and another parcel of investment land worth$80,000.(2 points each)(a)Quinn’s realized gain (loss) (RZ/G(L)) from the exchange is $_______________. (If a loss,you must put brackets around your answer.)(b)Quinn’s recognized gain (loss) (RN/G(L) from the exchange is $_______________. (If a loss,you must put brackets around your answer.)(c)Quinn’s basis in the new land received in the exchange is $________________.-OVER-4.Ron and Beth form Grackle Corporation with the following investment:From RonFurniture and Fixtures (adjustedbasis of $90,000 and FMV of$200,000)Equipment (adjusted basis of$210,000 and FMV of$200,000)From Beth$200,000$200,000Ron and Beth each receive 50 shares of stock in Grackle Corporation (worth $200,000). As a resultof this corporate formation: (2 points each)(a)(b)Ron’s recognized gain (loss) (RN/G(L)) is $_______________. (If a loss, you must putbrackets around your answer.)(c)5.Ron’s realized gain (loss) (RZ/G(L)) is $_______________. (If a loss, you must put bracketsaround your answer.)Grackle Corporation’s basis in the property it received from Beth is $_______________.On January 1 of the current year, Rachel and Bill form an equal partnership. Rachel makes a cashcontribution of $40,000 and a property contribution (adjusted basis of $55,000 and FMV of $40,000)in exchange for her 50% interest in the partnership. Bill contributes property (adjusted basis of$60,000 and FMV of $80,000) in exchange for his 50% partnership interest. As a result of thispartnership formation: (2 points each)(a)Rachel’s basis in her one-half interest in the partnership is $_______________.(b)Bill’s recognized gain (loss) (RN/G(L)) is $________________.(c)The partnership’s basis in the property contributed by Bill is $_______________.


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