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9 Oct 2018

Problem 17-37 (LO. 2)

During 2017, Gorilla Corporation has net short-term capitalgains of $15,000, net long-term capital losses of $105,000, andtaxable income from other sources of $460,000. Prior years'transactions included the following:

2013 net short-term capital gains $40,000
2014 net long-term capital gains 18,000
2015 net short-term capital gains 25,000
2016 net long-term capital gains 20,000

If an amount is zero, enter "0".

a. How much is Gorilla's net capital loss for2017?
$

What is the amount of the capital loss deduction on Gorilla's2017 tax return?
$

Any excess net capital loss is carried back or forward as a.

b. Of the excess 2017 net capital loss, howmuch is carried back to the previous years?
$

c. Compute the amount of capital loss carryoverto 2018 and future years.
$

Indicate the years to which the loss may be carried. Select"Yes" or "No", which ever is appropriate.

2018
2019
2020
2021
2022

d. If Gorilla is a sole proprietorship, ratherthan a corporation, how would the owner report these transactionson her 2017 tax return?

Gorilla offsets $ of capital gains against her losses and anadditional $ in capital . The remaining $ is .

e. Assume that Gorilla Corporation’s capitalloss carryfoward in part (c) is $27,000 and that Gorilla will beable to use $11,000 of the carryover to offset capital gains in2018 and the remaining $16,000 to offset capital gains in 2019.

Assume the following:

A discount rate of 5%.

Present value factors - 1.000 for 2014-2016; 0.952 for 2018 and0.907 for 2020.

Gorilla Corporation’s marginal income tax rate is 34% for alltax years.

Round your computations to the nearest dollar.

In present value terms, determine the tax savings of the$105,000 long-term capital loss recognized in 2017.
$

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Trinidad Tremblay
Trinidad TremblayLv2
11 Oct 2018

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Related questions

John (a sole proprietor) and Eagle Corporation (a C corporation)each recognize a long-term capital gain of $10,000 and a short-termcapital loss of $18,000 on the sale of capital assets. Neithertaxpayer had any other property transactions during the year.

a. Regarding John's gains and losses, labeleach of the following as "True" a tax consequence or "False" not atax consequence.

1. John reports the capital transactions on his individual taxreturn and deducts a $18,000 net capital loss in the currentyear.

2. John reports the capital transactions on his individual taxreturn but is limited to a $3,000 net capital loss deduction in thecurrent year.

3. John nets the $10,000 LTCG against the $18,000 STCL.

Regarding Eagle Corporation's gains and losses, label each ofthe following as "True" a tax consequence or "False" not a taxconsequence.

1.

Eagle Corporation nets the $10,000 LTCG against the $18,000STCL, resulting in a $8,000 net capital loss.

2.

Eagle is limited to a $8,000 net capital loss deduction in thecurrent year.

3. All of the $18,000 net capital loss is deductible in thecurrent year.

4. Eagle carries back a $8,000 STCL 3 years and, if necessary,forward 5 years, to be offset against capital gains in suchyears.

On February 10, 2018, Ace Corporation, a new calendar yearcorporation, elected S corporation status and all shareholdersconsented to the election. There was no change in its shareholdersduring the current year. Ace met all eligibility requirements foran S corporation during the preelection portion of the year. Whatis the earliest date on which Ace can be recognized as an Scorporation?

February 10, 2018

January 1, 2019

February 10, 2019

January 1, 2018

In March of 2017 Frederick acquired an passenger automobile for$45,000 and used the automobile 85% for business. Themaximum depreciation deduction for 2017 is:

$3,160

$11,160

$8,928

$9,486

In August of 2017, Joseph acquires andplaces into services business equipment costing $300,000. Theequipment is classified as 5-year recovery property. No otheracquisitions are made during the year. Joseph elects to expense themaximum amount under Sec. 179. Joseph’s total deductions for theyear are:

$60,000

$500,000

$100,000

$300,000

For the current tax year, VBN, an S Corporation distributes$100,000 to its sole shareholder, Raymond. His basis in the stockwas $140,000 before the distribution. VBN had once been a regular CCorporation and had remaining accumulated earnings and profits(E&P) from those years of $70,000. However, VBN has no balancein its accumulated adjustment account. How should the distributionof $100,000 be handled?

$100,000 as a taxable distribution

$70,000 as a taxable dividend, and $30,000 has a non taxablereturn of capital

$50,000 as a taxable dividend, and $100,000 as a non taxablereturn of capital

$70,000 as a taxable dividend; and $30,000 as a capital gain

Stahl, an individual who owns 100% of Talon, an S corporation,had a basis of $50,000 at the first of the year. During the yearTalon reported the following: Ordinary Loss of $10,000; Municipalinterest income of $8,000, Long term capital gain of $4,000; andLong term capital loss of $9,000. What was Stahl's basis in Talonat year end?

$56,000

$65,000

$53,000

$43,000

During the current year, Marlene, Nancy and Olive formed a new SCorporation. Solely in exchange for stock, Marlene and Nancycontributed appreciated property, while Olive contributed services.The exchanges of Marlene and Nancy will be nontaxable if:

Olive receives 30% of the stock

Olive receives 80% of the stock

Olive receives 15% of the stock

Marlene and Nancy together receive 50% of the stock

In June of 2018, Alice acquired heronly machine for $30,000 to use in her business. The machine isclassified as 5-year property. Alice’s maximum depreciation(including bonus) on the machine this year is:

$30,000

$12,000

$6,000

$18,000

Cactus Corporation, an S Corporation, had accumulated earningsand profits of $200,000 at the beginning of the tax year. Tex andShirley each own 50% of the stock. During the current year Cactushad $100,000 of ordinary income and distributed $10,000 to Tex and$10,000 to Shirley. What is Tex's taxable income for the currentyear?

$10,000

$0

$100,000

$50,000

Bristol Corporation was formed as an S Corporation on January 1,2014 and elected S corporation status at that date. Bristol has hadthe same 25 shareholders throughout its existence and has one classof stock. Bristol's S election will terminate if it:

10% of the shareholders vote to revoke the election

to purchase 10 shares

Allows a variation in the voting rights of the stock

Increases the number of shareholders to 125

On February 10, 2018, Ace Corporation, a new calendar yearcorporation, elected S corporation status and all shareholdersconsented to the election. There was no change in its shareholdersduring the current year. Ace met all eligibility requirements foran S corporation during the preelection portion of the year. Whatis the earliest date on which Ace can be recognized as an Scorporation?

February 10, 2018

January 1, 2019

February 10, 2019

January 1, 2018

In March of 2017 Frederick acquired an passenger automobile for$45,000 and used the automobile 85% for business. Themaximum depreciation deduction for 2017 is:

$3,160

$11,160

$8,928

$9,486

In August of 2017, Joseph acquires andplaces into services business equipment costing $300,000. Theequipment is classified as 5-year recovery property. No otheracquisitions are made during the year. Joseph elects to expense themaximum amount under Sec. 179. Joseph’s total deductions for theyear are

$60,000

$500,000

$100,000

$300,000

For the current tax year, VBN, an S Corporation distributes$100,000 to its sole shareholder, Raymond. His basis in the stockwas $140,000 before the distribution. VBN had once been a regular CCorporation and had remaining accumulated earnings and profits(E&P) from those years of $70,000. However, VBN has no balancein its accumulated adjustment account. How should the distributionof $100,000 be handled?

$100,000 as a taxable distribution

$70,000 as a taxable dividend, and $30,000 has a non taxablereturn of capital

$50,000 as a taxable dividend, and $100,000 as a non taxablereturn of capital

$70,000 as a taxable dividend; and $30,000 as a capital gain

Stahl, an individual who owns 100% of Talon, an S corporation,had a basis of $50,000 at the first of the year. During the yearTalon reported the following: Ordinary Loss of $10,000; Municipalinterest income of $8,000, Long term capital gain of $4,000; andLong term capital loss of $9,000. What was Stahl's basis in Talonat year end?

$56,000

$65,000

$53,000

$43,000

Gross Receipts of $70,000; Tax Exempt Interest Income of $4,000;Dividends of $10,000; Supplies Expense of $3,000; and UtilitiesExpense of $1,500. What amount is the S Corporation's ordinarytaxable income?

$75,500

$79,500

$70,000

$65,500

Bob and Sam each owned 50% of Lostalot, an S Corporation. Bob'sbasis is $30,000 and Sam's basis is $15,000. The corporation hasoperating loss for the current year of $50,000. Howmuch loss can each shareholder deduct in the current year assumingthey materially participate in the business:

Bob: $25,000; Sam: $15,000

Bob: $0; Sam: $0

Bob: $25,000; Sam: $25,000

Bob: $30,000; Sam: $15,000

Terra Corporation, a calendar-yeartaxpayer, purchases and places into service in 2017 machinery witha 7-year life that cost $650,000. The mid-quarter convention doesnot apply. Terra’s taxable income for the year before the Sec. 179deduction is $700,000. What is Terra’s total maximum depreciationdeduction related to this property?

$585,718

$521,345

$92,885

$500,000

Identify which of the following statements is false.

The PTI (previously taxed income) represents the balance ofundistributed net income which were already taxed.

The AAA balance can be negative, but the shareholder's basis inthe S corporation stock cannot be less than zero.

Tax exempt income increase the AAA and the basis of the Scorporation stock.

An S Corporation may or may not have accumulated Earnings andProfits

Elaine owns an unincorporated manufacturing business. In 2017,she purchases and places in service $600,000 of qualifying fiveyear equipment for use in her business. Her taxable income from thebusiness before any section 179 deduction is $100,000. Which of thefollowing statements is true?

Elaine cannot deduct any Section 179 deduction for 2017

Elaine can deduct $100,000 as a Section 179 deduction in 2017with a $400,000 carryover to next year.

Elaine can deduct $100,000 as a Section 179 deduction in 2017with a $500,000 carryover to the next year

Elaine can deduct $500,000 as a section 179 deduction in2017

Charles, an individual, owned 100% of the Alpha, an Scorporation. At the first of the year, Charles' basis in Alpha was$25,000. In the current year, Alpha realized ordinary income of$1,000; and a long term capital gain of $3,000. Alpha distributed$25,000 to Charles at the end of the year. What amount of the$25,000 is taxable to Charles?

$0

$7,000

$1,000

$25,000

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