1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Anastasy [175]
3 years ago
11

Rhonda owns 50% of the stock of Peach Corporation. She and the other 50% shareholder, Rachel, have decided that additional contr

ibutions of capital are needed if Peach is to remain successful in its competitive industry. The two shareholders have agreed that Rhonda will contribute assets having a value of exist200,000 (adjusted basis of exist15,000) in exchange for additional shares of stock. After the transaction, Rhonda will hold 75% of Peach Corporation and Rachel's interest will fall to 25%
a. What gain is realized on the transaction? How much of the gain will be recognized?
b. Rhonda is not satisfied with the transaction as proposed How will the consequences change if Rachel agrees to transfer exist1,000 of cash in exchange for additional stock? In this case, Rhonda will own slightly less than 75% of Peach and Rachel's interest will be slightly more than 25%.
c. If Rhonda still is not satisfied with the result, what should be done to avoid any gain recognition?
Business
1 answer:
marin [14]3 years ago
5 0

Answer:

Explanation:

The transaction is fully taxable because Rhonda, the sole transferor of property, does not have control immediately after the transaction. Therefore, all of the realized gain is recognized.

Amount realized—stock                                                 $200,000

Less: Adjusted basis of property transferred                  (15,000)

Realized gain                                                                   $185,000

Recognized gain                                                             $185,000

b. With the change, Rhonda is trying to avoid recognizing the $185,000 gain. The plan involves Rachel becoming a transfer of property along with Rhonda so that together they would meet the 80% control test. If Rhonda is part of a group that meets the control test, she would avoid recognizing the gain. However, this plan will not be successful. Rachel’s interest cannot be counted since the value of the stock she would receive is relatively small compared to the value of the stock she already owns. In addition, Rachel’s contribution would be made primarily to qualify Rhonda for § 351 treatment.

c. The following alternatives would enable Rhonda to avoid gain recognition:

•    Rhonda can transfer property that has not appreciated in value. For example, if she were to contribute $200,000 of cash to Peach, Rhonda would not recognize gain on the transaction.

•    Rachel could contribute property of an amount that is not small relative to the value of the stock already owned. By doing so, she would be considered a transfer  of property along with Rhonda, and together, they would have control. As a result, Rhonda would avoid gain recognition. For example, if the value of Rachel’s stock is worth approximately $200,000 prior to the contribution, a transfer of at least $20,000 would likely be sufficient to avoid the relative-small-in-value test.

You might be interested in
On January 1, 2021, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The
Setler [38]

Answer:

1. In 2021, Capitalized interest = $205,000

2. In 2022, Capitalized interest = $3,870,000

3. Total cost = $5,231,980

Explanation:

See the attached file for the  calculation

3 0
3 years ago
DO
kogti [31]

Answer:ok

Explanation:

8 0
3 years ago
In microeconomics, the term ___________________ is synonymous with decreasing returns of scale.
allsm [11]

<u>In </u><u>microeconomics</u><u>, the term </u><u>monopoly</u><u>  is synonymous with decreasing returns of scale.</u>

When there are economies of scale in production?

As output increases, the long-run average total cost decreases. The total variable cost of creating five units of output is indicated by the Y-interval between the two curves in the diagram.

Is price and marginal cost equal?

  • In economics, the practice of setting a product's price to cover the additional expense of producing an additional unit of output is known as marginal cost pricing.
  • This policy limits the producer's ability to charge for each unit of a product sold to the addition to total cost attributable to materials and direct labor.

Simply put, what is microeconomics?

  • Microeconomics is the study of how people, households, and businesses make decisions and distribute resources.
  • It generally pertains to markets for goods and services and addresses both personal and financial concerns.

Learn more about microeconomics

brainly.com/question/8102286

#SPJ4

4 0
2 years ago
The Macro Islands can produce either 250 bamboo towels or 500 botanical soaps using all its resources. The Micro Islands can pro
jarptica [38.1K]

Answer:

The Micro Islands have a comparative advantage in producing botanical soaps.

Explanation:

Comparative advantage can be defined as the ability of an economy to produce a good at lower opportunity cost than other economies. This enables the economy sell the product at lower prices, therefore having higher margin of profit than other economies.

The opportunity cost of Micro Island in producing 300 botanical soaps is the cost of producing 30 bamboo towels. The opportunity cost is quite low.

While for Macro Island the opportunity cost of producing 500 botanical soaps is 250 bamboo towels. The opportunity cost is higher than for Micro Island.

6 0
3 years ago
You are going to a dinner whith three (3) friends, one who likes steak, another wine, and the third is a vegetarian (which is as
DENIUS [597]

Answer:

the answer is option D)<u>Equal sharing of the bill ensures that people order a similar dollar amount of food</u>

Explanation:

The theory of consumer behavior states that "consumers allocate incomes among different goods and services to maximize their utility"

Consumer behavior revolves around three parameters their preferences, budget constraints, and options available.

The budget constraint will definitely influence the choice of what to buy within the options available to maximize utility. That means how the bill is shared among the three friends will ultimately affect how much they will chose to eat.

Secondly, The vegetarian will not be better off with equal sharing of the bill because the cost of his food according to the data provided is less.

We don not know for sure if the wine drinker drinks too much or whether he will want his other friends to foot the extra bill from the cost of his wine but we are certain that equal sharing of the bill ensures that people order a similar dollar amount of food.

3 0
3 years ago
Other questions:
  • If you borrow​ $100,000 at an annual rate of​ 8.00% for a 10minusyearperiod and repay with 10 equal annual endminusofminusthemin
    6·1 answer
  • The IAC must obtain a IAC written certification with every cargo shipment
    6·1 answer
  • One common strategy for attracting the most buyers, which can be accomplished through several tactics, is:
    15·1 answer
  • What is the purpose of general education classes in college reddit?
    15·1 answer
  • A company purchased $9,100 of merchandise on June 15 with terms of 3/10, n/45. On June 20, it returned $455 of that merchandise.
    12·1 answer
  • During the current year, Paul, the vice president of a bank, made gifts in the following amounts: To Sarah (Paul's personal assi
    14·1 answer
  • What aspect of a business deals with the policies, practices, and systems that influence the behavior, attitudes, and performanc
    8·1 answer
  • Company has 10,000 shares of $100 par value 8% preferred stock and 50,000 shares of $10 par value common stock outstanding at De
    9·1 answer
  • Which feature of a customs union differentiates it from a free trade area?
    5·1 answer
  • One year ago, you invested $3,250.00. Today, it is worth $4,000.00. What rate of interest did you earn
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!