Transfers to Controlled Corporations

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timer Asked: Jan 9th, 2019
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Question Description

Discussion Topic:

Create a scenario where the transfer of property to a controlled corporation under Section 351 of the Internal Revenue Code (IRC) results in the taxation to the transferor. Speculate as to the reasons that gain treatment in the current year may be preferred to the deferral of gain. Provide a tax-planning strategy to prevent taxation of similar transfers.

Client Letter (check file) Imagine that you are a Certified Public Accountant (CPA) with a new client who needs an opinion on the most advantageous capital structure of a new corporation. Your client formed the corporation in question to provide technology to the medical profession to facilitate compliance with the Health Insurance Portability and Accountability Act (HIPAA).

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1. Assignment 1: Client Letter Imagine that you are a Certified Public Accountant (CPA) with a new client who needs an opinion on the most advantageous capital structure of a new corporation. Your client formed the corporation in question to provide technology to the medical profession to facilitate compliance with the Health Insurance Portability and Accountability Act (HIPAA). Your client is very excited because of the ability to secure several significant contracts with enough capital. Use the Internet and research the advantages and disadvantages of debt for capital formation versus equity for capital formation of a corporation. Prepare a formal letter to the client using the six step tax research process in Chapter 1 that was demonstrated in Appendix A on page 7 of your textbook as a guide. 1. 2. • • • Write a one (1) page letter in which you: Compare the tax advantages of debt versus equity capital formation of the corporation for the client. Recommend to the client whether he / she should use debt or equity for capital formation of the new corporation, based on your research. Provide a rationale for the response. Your assignment must follow these formatting requirements: Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions. Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length. The specific course learning outcomes associated with this assignment are: Analyze and research tax issues regarding corporations, partnerships, S corporations, and consolidated tax returns. ...
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Tutor Answer

JesseCraig
School: New York University

Attached.

Running head: TAX PLANNING STRATEGY

TAX PLANNING STRATEGY
Name:
Institution affiliation:
Date:

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TAX PLANNING STRATEGY

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TAX PLANNING STRATEGY
According to the IRC Section 351(b) part (a), “no gain or loss shall be recognized if a
property is transferred to a corporation by one or more persons solely in exchange for stock in
such corporation and immediately after the exchange such person or persons are in control...”
(DeRoy, 2017). Situations that deviate from this description result in the taxation of gains.
Scenarios which lead to taxation of profit include instances in which the transferor does not
obtain control immediately after the exchange and when cash and cash equivalents are the
settlement for stock.
A sample scenario would be to suppose John-a businessman decided to incorporate
his shipping company and Livingstone-a sole proprietor transfers property worth $20,000 i...

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Anonymous
Tutor went the extra mile to help me with this essay. Citations were a bit shaky but I appreciated how well he handled APA styles and how ok he was to change them even though I didnt specify. Got a B+ which is believable and acceptable.

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