Redbud Co., an S corporation, makes a nonliquidating distribution to its sole shareholder of property in which it has a $30,000 basis. How much gain or loss does Redbud recognize if the property has a fair value of $37,000, and how does your answer change if the property has a fair value of $26,000?

Nicole and Paula each own 50 percent of Magnolia, an S corporation. Magnolia reported the following revenues and expenses:   Sales revenue – $720,000 Cost of goods sold – ($200,000) Depreciation expense (MACRS) – ($12,000) Sec. 179 expense – ($44,000) Long-term capital gains – $8,000 Qualified dividends – $5,000 Nontaxable interest income – $3,000 Salary to owners – ($120,000) Employee wages (excluding salaries to owners) – ($50,000)   In addition, Nicole and Paula each received distributions of $10,000 from Magnolia.   (1) How much ordinary business income is allocated to Nicole?   (2) What are the separately stated items allocated to Nicole?   (3) If Nicole’s basis in her Magnolia stock at the beginning of the year was $40,000, what is her basis after considering the above items?

Partnerships generally recognize a gain on nonliquidating distributions of appreciated property. (assume no Sec. 754 election is in effect)

Beryl owns 100 percent of Hoptree Inc., an S corporation. At the beginning of the year, Beryl’s basis in her stock was $60,000, Hoptree’s accumulated adjustments account (AAA) balance was $35,000, and Hoptree’s earnings and profits from prior C corporation years (accumulated E&P) was $10,000. If Hoptree makes a nonliquidating distribution of $60,000 to Beryl, what is Beryl’s remaining stock basis after the distribution?

Hermine is a partner with a capital and profits interest in Fringetree, a general partnership. On January 1, Fringetree distributes the following assets to Hermine in complete liquidation of her interest (a proportionate liquidating distribution):     Fair value Adjusted basis Cash $60,000 $60,000 Hot Asset $10,000 $0 Other Asset A $40,000 $30,000 Other Asset B $160,000 $90,000 Total $270,000 $180,000   The partnership has no liabilities.   (1) If Hermine’s basis in her partnership interest was $80,000, what is Hermine’s beginning basis in Other Asset A after the distribution?   (2) If Hermine’s basis in her partnership interest was instead $360,000 (and not $80,000), what is Hermine’s beginning basis in Other Asset A after the distribution?   (3) Assume Fringetree held Other Asset A for two years prior to the distribution. What is Hermine’s holding period in this distributed asset?   (4) Assume the distributed Hot Asset is inventory and that Hermine sells it for more than her basis three years after the distribution. What is the character of Hermine’s gain if she does not hold the property for sale as inventory?

Note: use the following fact pattern for the next four questions.   Lisa and Richard wish to acquire Acacia Corp., a C corporation. As part of their discussions with Tobias, the sole shareholder of Acacia, they examined the business’ tax accounting balance sheet. The relevant information is summarized as follows:   Fair value Adjusted basis Assets: Cash $30,000 $30,000 Equipment $70,000 $10,000 Building1 $260,000 $140,000 Land1 $410,000 $180,000 Total $770,000 $360,000 Liabilities: Payables $20,000 $20,000 Mortgage1 $150,000 $150,000 Total $170,000 $170,000   1 Mortgage is attached to the building and the land.   Tobias’ basis in the Acacia stock is $400,000. Lisa and Richard offer to pay Tobias $900,000 for his company.   How much gain or loss must Acacia recognize if the transaction is structured as a stock sale to Lisa and Richard?

Lisa and Richard wish to acquire Acacia Corp., a C corporation. As part of their discussions with Tobias, the sole shareholder of Acacia, they examined the business’ tax accounting balance sheet. The relevant information is summarized as follows:     Fair value Adjusted basis Assets:     Cash $30,000 $30,000 Equipment $70,000 $10,000 Building1 $260,000 $140,000 Land1 $410,000 $180,000 Total $770,000 $360,000       Liabilities:     Payables $20,000 $20,000 Mortgage1 $150,000 $150,000 Total $170,000 $170,000   1 Mortgage is attached to the building and the land.   Tobias’ basis in the Acacia stock is $400,000. Lisa and Richard offer to pay Tobias $900,000 for his company.   How much gain or loss must Tobias recognize if the transaction is structured as a stock sale to Lisa and Richard?

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You have 180 minutes to complete the exam. Choose the BEST answer for the multiple-choice questions.  The formula webpage is accessed in the exam under “Guidelines”.  This exam is 100% multiple choice; no work submission required (though scratch paper is still strongly encouraged during the exam). Formula Webpage: https://berger-acc-chemistry.mailchimpsites.com/general

Which statement regarding a feeding tube is true?