[Keely]

Can anyone offer any insight or a place that has extra information on the tax consequences to both a corporation and shareholders when forming a corporation, and especially what their basis is? I thought I knew what I was doing until I got to the practice SIMs, (Simulation 1: #s 2 and 3…especially 3). Regarding #3, I thought the tax basis to the corporation was the greater of the shareholder’s NBV of the property or the liability assumed by the corporation. But the solution is calculating the basis as the NBV of the transferred property plus any cash the corporation paid to the shareholder. The Becker book doesn’t say anything about a corp.’s basis increasing by paying cash. Or maybe it does and I’m just so confused I misread it.

Can anyone shed some light? I haven’t been this confused about an exam topic in a very long time.

BEC: (4/2012) 88
AUD: (5/2012) 91
REG: (8/2012) 82
FAR: (1/2013) 78 🙂

VA CPA #42010

[Keely]

Bump…please 🙂

BEC: (4/2012) 88
AUD: (5/2012) 91
REG: (8/2012) 82
FAR: (1/2013) 78 🙂

VA CPA #42010

[Anonymous]

I might be able to help. First post the question bc i do not have becker.

[shiggity80]

I don't have any answers for you OP, but I am in the middle of R3 myself and wow, it's a lot of material to grasp.

I thought R1 and R2 were pretty simple and was feeling good so far with REG, then bam, R3 hit and I'm like “Holy crap this is insane”. I know I will have to re-read and review this section many times.

FAR: 87
AUD: 86
BEC: 86
REG: 84! Officially Done!

[Shay]

@keelydare1..

R3-5…Ex 2. (iii) Greaty's stock basic===Old Basics – Debt assumed by Corp + RECOGNIZED GAIN (YOU ARE IGNORING THIS)

So, when do you recognized Gain? Whenever you get cash/boot and whenever you have NBV < Debt assumed by Corp (R3-4..#2.b.2..also see example on same page)

[Keely]

Thanks for the responses. I am just going to read it again and see if it makes more sense, or if I can come up with a more specific question. I went on to R4 today. R3 is just a pain in the ass.

BEC: (4/2012) 88
AUD: (5/2012) 91
REG: (8/2012) 82
FAR: (1/2013) 78 🙂

VA CPA #42010

[Shay]

@keelydare1 after R4.1, its all reading…Did you understand how to go from Book income to taxable income?

I finished reading all R8 section. Now, I am going back to doing MCQ again. still getting.

[Keely]

Shay, yeah, I understand book to taxable income pretty well. And I'm looking forward to the Business Law sections. I just had that class last semester and I think I paid good enough attention to have a head start 🙂 I found partnership tax to be easy, it's where I made my highest MCQ % the first time around. So why am I not understanding corp. tax?!?! Frustrating.

BEC: (4/2012) 88
AUD: (5/2012) 91
REG: (8/2012) 82
FAR: (1/2013) 78 🙂

VA CPA #42010

[Shay]

so how to go from book to taxable income? My MCQ are all over the place…

[Pass_for_sure]

@Keely – I have the same question that you had. I don't understand the explainations to the R3 simulations #1 & 2. I have aways though that we use GREATER OF: NBV + Gain recognized by the shareholders OR debt assumed by Corporation. If this rule applies, then in the answer would be: 40,000 NBV + 10,000 Gain Recognized (since COD is in excess of the NBV) = 50,000. But why is the answer said only 40,000 as the basis???

Did you find out about this??

Thanks

FAR - 73, 83
AUD - 92
REG - 83
BEC - 86 thank you god

Passed CMA 2011

[Author]

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