[Mich-CPA-Soon]

Hello all,

This is my first post! Been a longtime lurker on the forum, so thanks for the all the help so far. Got my last test REG on Monday and just have a quick question on corporate taxes.

Basis for a SHAREHOLDER for contributed property = Basis transferred(including cash) + Gain recognized – Boot received (includes liabilities assumed by corp).

Basis for the CORPORATION for the contributed property = Basis of property transferred(including cash) + gain recognized

So here’s my question. Why is there a difference in the two formulas? I understand shareholder basis would be used when the corporation dissolves to calculate a capital gain on the final distributions. But what is the corporation basis used for? I encountered a simulation where it asked to record the balance sheet amounts for the contributed property, which I guess is only based on the FMV? So this lead me to ask why is the balance sheet and tax basis to the CORPORATION different..?

I know it’s probably some simple logic I’m probably missing but I don’t understand why there is basically three different amounts being used..

Any help is much appreciated!

AUD 8/14/15 - 84
BEC 9/10/15 - 83
FAR 11/4/15 - 85
REG 12/9/15 - 80

[tuanxn]

Haha, you should be fine. Don't stress about it too much, just remember the main idea and you'll do well.

[EuroAddict]

I'm actually more worried about biz law than I am tax section.

-----------------------------
BEC - 77, 03/2015 (first try)
FAR - 79, 05/2015 (second try)
REG - 83, 12/2015 (first try)
AUD - 84, 03/2015 (first try)

I got 99 problems but the CPA ain't one.

[tuanxn]

To be honest with you, I was weaker there too. At least Tax has hard and fast rules. Business law is pretty convoluted.

Your best bet is to nail the easier business law questions on the first testlet, so that they don't show up too much on the 2nd and 3rd testlet (since the test is adaptive and will create more questions for categories you miss).

I focused on getting the BLaw questions right in the first and second testlet so I wouldn't get too many on the third.

[EuroAddict]

Yea I hope it all goes well. It will make for a happier holiday season lol

-----------------------------
BEC - 77, 03/2015 (first try)
FAR - 79, 05/2015 (second try)
REG - 83, 12/2015 (first try)
AUD - 84, 03/2015 (first try)

I got 99 problems but the CPA ain't one.

[for425]

Corporation Basis Question-

FMV of property- 80,000
Liability w/ property- 50,000
Basis of property- 40,000
Cash contributed- 20,000
Cash distributed to shareholder- 0

Answer from sim: Corporation basis- 40,000

Why?

My thought process:
Basis for the CORPORATION for the contributed property = Basis of property transferred(including cash) + gain recognized
Basis 40,000 + cash contributed 20,000 + gain recognized?

FAR - 72, 81
BEC - 76
REG - 78
AUD - 61 (1/24), Retake (6/6)

Materials: Becker
FAR Retake: + Wiley TB
REG & AUD: + Ninja MCQ

[EuroAddict]

The way I am looking at that is corp gets the basis of 50 (greater of basis vs liability) but then shareholder recognized 10 gain so minus that 10 = 40.

-----------------------------
BEC - 77, 03/2015 (first try)
FAR - 79, 05/2015 (second try)
REG - 83, 12/2015 (first try)
AUD - 84, 03/2015 (first try)

I got 99 problems but the CPA ain't one.

[Author]

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