14-24. The purpose of the dividends received deduction is to reduce the amount of taxable events when a company earns a profit and pays dividends to shareholders. The dividends that qualify for this deduction are those paid out of the corporate earnings by domestic corporations subject to the US corporate income tax.
14-51. The purpose of the reconciliation of taxable income with book income would be to establish ascertain temporary and permanent differences. The net income on the financial books of a corporation may differ from the taxable income declared on its tax return. These differences are caused by the accounting methods used in financial and tax accounting rules. The differences used to determine financial and taxable income may be temporary or permanent. Permanent differences include income, deductions gains, and losses that may affect either book or taxable income.
a. How much gain does Sam recognize on his exchange? What is the basis to Sam of his 900 shares? $27,000 - $15,000 = $12,000. Sam recognizes a gain of $12,000. His basis is $15,000 .
b. How much gain does Bill recognize on his exchange? What is the basis to Bill of his 100 shares? $3,000 - $1,000 = $2,000. Bill’s basis is $1,000.
c. What gain or loss is recognized by the corporation when it issues its shares to Sam? What is the basis to the corporation of the property it received from Sam? No gain is recognized by the corporation. The basis of the property received from Sam is $15,000.
d. What is the gain or loss recognized by the corporation when it issues its shares to Bill? What is the basis to the corporation of the property it received from Bill? No gain is recognized by the corporation. The basis if the property received from Bill is $1,000.
Identify and briefly describe the seven types of corporate reorganization.
A. A statutory merger or consolidation. – transaction needs to comply with the terms for a merger or consolidation under the applicable state...