Accounting

Abby and Velma are equal owners of the AV Partnership. Abby invests $75,000 cash in the partnership. Velma contributes land and a building (basis to her of $50,000, fair market value of $75,000). The entity then borrows $200,000 cash using recourse financing and $100,000 using nonrecourse financing.

a. Compute the outside basis in the partnership interest for Abby and Velma.

b. Compute the at-risk amount for Abby and Velma.

Megan owns 60% and Vern owns 40% of a business entity. The owners would like to use the entity to share profits (60% for Megan and 40% for Vern) and to share losses (90% for Vern and 10% for Megan).

Determine the tax consequences for 2010 if the entity has a tax loss of $100,000 and is organized as: a. A partnership. b. A C corporation. c. An S corporation.

Determine which, if any, of the multistate information-sharing groups your state has joined, as to either income or sales/use tax transactions.

Determine the tax consequences of the sale of the land for the entity and its owners if the entity is organized as: a.

A C corporation.

b. An S corporation.

c. A partnership.

 

Solution:

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