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Rosa contributes $50,000 to a business entity in exchange for a10% ownership interest. Rosa materially participates in the entity.The business entity incurs a loss of $900,000 for the current taxyear and holds liabilities at the end of the year of $700,000. Ofthis amount, $150,000 is recourse debt and $550,000 is nonrecoursedebt.

If an amount is zero, enter "0".

a. Assume that the business entity is apartnership.

How much of the entity loss can Rosa deduct on her the currenttax year income tax return?
$________

What is her basis for the partnership interest at the end of thecurrent tax year?
$__________

b. Assume that the business entity is a Ccorporation.

How much of the entity loss can Rosa deduct on her the currenttax year income tax return?
$_________

What is her basis for the stock at the end of the current taxyear?
$________

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Casey Durgan
Casey DurganLv2
28 Sep 2019

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Parson Company acquired an 80 percent interest in Syber Companyon January 1, 2017. Any portion of Syber's business fair value inexcess of its corresponding book value was assigned to trademarks.This intangible asset has subsequently undergone annualamortization based on a 15-year life. Over the past two years,regular intra-entity inventory sales transpired between the twocompanies. No payment has yet been made on the latest transfer. Alldividends are paid in the same period as declared.

The individual financial statements for the two companies aswell as consolidated totals for 2018 follow:

Parson
Company		 Syber
Company		 Consolidated
Totals
Sales $ (900,000 ) $ (700,000 ) $ (1,460,000 )
Cost of goods sold 550,000 450,000 870,000
Operating expenses 120,000 130,000 253,000
Income of Syber (89,800 ) 0 0
Separate company net income $ (319,800 ) $ (120,000 )
Consolidated net income $ (337,000 )
Net income attributable tononcontrolling interest 17,200
Net income attributable toParson Company $ (319,800 )
Retained earnings, 1/1/18 $ (626,600 ) $ (310,000 ) $ (626,600 )
Net income (above) (319,800 ) (120,000 ) (319,800 )
Dividends declared 80,000 40,000 80,000
Retained earnings, 12/31/18 $ (866,400 ) $ (390,000 ) $ (866,400 )
Cash and receivables $ 398,000 $ 90,000 $ 464,000
Inventory 200,000 180,000 365,500
Investment in Syber Company 398,400 0 0
Land, buildings, andequipment 400,000 290,000 690,000
Trademarks 0 0 32,500
Total assets $ 1,396,400 $ 560,000 $ 1,552,000
Liabilities $ (320,000 ) $ (80,000 ) $ (378,900 )
Common stock (170,000 ) (90,000 ) (170,000 )
Additional paid-in capital (40,000 ) 0 (40,000 )
Noncontrolling interest inSyber 0 0 (96,700 )
Retained earnings (above) (866,400 ) (390,000 ) (866,400 )
Total liabilities andequities $ (1,396,400 ) $ (560,000 ) $ (1,552,000 )

What method does Parson use to account for its investment inSyber?

What is the balance of the intra-entity inventory gross profitdeferred at the end of the current period?

What amount was originally allocated to the trademarks?

What is the amount of the current year intra-entity inventorysales?

Were the intra-entity inventory sales made upstream ordownstream?

What is the balance of the intra-entity liability at the end ofthe current year?

What amount of intra-entity gross profit was deferred from thepreceding period and recognized in the current period?

What was the ending Noncontrolling Interest in Syber Companycomputed?

With a tax rate of 40 percent, what income tax journal entry isrecorded if the companies prepare a consolidated tax return?

With a tax rate of 40 percent, what income tax journal entry isrecorded if these two companies prepare separate tax returns?

1. In your "own" words, please describe what a "Suspended Loss" is,how it is generated and when it is becomes deductible. (5pts)

2.Please describe "Active Participation" as it relates to ataxpayer's involvement in an investment in Real Estate. (5pts).

Chapter8

3.Macy had a lot of medical expenses this year that were not coveredby her insurance (either due to a deductible, co-insurance, orco-pay). Herun-reimbursed qualifyingmedical expenses total $8,356 and her AGI for 2013 is $45,000.Assuming she will itemize on her 2013 tax return, how much of hermedicalexpenses willshe be able to deduct? (5pts)

4.Heather & Terry have a mortgage on their primary residence of$750,000 and a mortgage on their vacation home of $410,000. In2013, they incurred$46,400 ofmortgage interest expense. How much, if any, of that interest isdeductible on Schedule A? (5 pts)

Chapter 14

1. Please describe the concept of "doubletaxation" and discuss which entity(ies) are subject to this type oftaxation. (5 pts)

2. What type oftaxpayers are considered "eligible" taxpayers with regard tospecial ordinary loss treatment of IRC Section 1244 stock? (5pts.)

3. Pleasedescribe how the treatment of capital gains(losses) differ for a CCorporation as compared to an Individual. ( 5 pts.)

4. Please describethe concept of "Depreciation recapture". ( 5 pts.)

1. In your "own" words, please describe what a "Suspended Loss" is,how it is generated and when it is becomes deductible. (5pts)

2.Please describe "Active Participation" as it relates to ataxpayer's involvement in an investment in Real Estate. (5pts).

Chapter8

3.Macy had a lot of medical expenses this year that were not coveredby her insurance (either due to a deductible, co-insurance, orco-pay). Herun-reimbursed qualifyingmedical expenses total $8,356 and her AGI for 2013 is $45,000.Assuming she will itemize on her 2013 tax return, how much of hermedicalexpenses willshe be able to deduct? (5pts)

4.Heather & Terry have a mortgage on their primary residence of$750,000 and a mortgage on their vacation home of $410,000. In2013, they incurred$46,400 ofmortgage interest expense. How much, if any, of that interest isdeductible on Schedule A? (5 pts)

Chapter 14

1. Please describe the concept of "doubletaxation" and discuss which entity(ies) are subject to this type oftaxation. (5 pts)

2. What type oftaxpayers are considered "eligible" taxpayers with regard tospecial ordinary loss treatment of IRC Section 1244 stock? (5pts.)

3. Pleasedescribe how the treatment of capital gains(losses) differ for a CCorporation as compared to an Individual. ( 5 pts.)

4. Please describethe concept of "Depreciation recapture". ( 5 pts.)

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