Question

1. Gold Corp. is a manufacturing corporation. The cash generated by the manufacturing business is invested into the real estate development. Gold Corp. wants to reduce the risk in the real estate business and thinks of incorporating a 100% owned new subsidiary and transfer all real estate business under the new sub. This transaction qualifies as what type of reorganization. Please justify your answer. explain

1. Type A
2. Type B
3. Type C
4. Type D

2. Copper Inc, a U.S. parent, operates an unincorporated branch in Russia. On its U.S. tax return, Copper Inc. reports $900,000 of taxable income from Russian branch and $2 million of taxable income from its U.S. operations. copper Inc. paid $100,000 of Russian taxes related to its branch operation in Russia. Calculate Copper Inc.’s U.S. tax liability assuming 21% flat tax rate and taking foreign tax credit benefit under Section 901. Please show all calculations.

3. 10 friends form an S Corporation named “Diamond” in year 2019 and contribute $10,000 each. Assume there are no nonresident aliens in this corporation. In the year 2019, Jason and Hellen, starts taking distributions of $15,000 each without receiving any reasonable salary. Both these shareholders devote almost 100% of their time to this business. Please describe in detail, the tax implications on this distribution to the company and to the shareholders. Assume the business made money and has positive AAA account balance. explain in detail

4. Roxanne starts the new business and she needs your help. She thinks she “pays too much in taxes”. She needs limited liability protection for her business but also does not want to spend too much time in incorporation and administrative expenses. She has no business partner and her husband helps her in the business. She thinks she may need capital in the future and therefore an additional business partner may be needed. She estimates that she could make about $25,000,000 in revenue and about $1,000,000 in profits during the first year. Roxanne keeps no inventory. Roxanne also heard from her friend  that there are some new deductions/benefits for small business. Please advise Roxanne for structuring her business. explain in detail

Answer 1

1) Its a Type B reorganization.

Solis corp is indulged in the manufacturing business. But they have invested in real estate and now transferring all the real estate into a new company.

Type A: Mergers and Consolidations – A statutory merger or acquisition depends on one partnership procuring another's advantages.

Type B: Acquisition (Target Corporation Subsidiary) – A Type B redesign includes one partnership procuring another's stock, which at that point turns into an auxiliary of the securing organization. While the exchange might be made exclusively to procure casting a ballot stock, it can likewise be one of a few exchanges that make up a bigger arrangement for obtaining control. An acquisition completed in this type of revamping happens in a brief timeframe, for example, inside a year.

Type C: Acquisition (Target Corporation Liquidation) – Target companies are required to sell in Type C acquisition, except if necessities are deferred by the IRS. Any investors that have a stake in the organization will likewise have a stake in the getting organization. Redesign arrangements concern charge outcomes, not liquidation rules.

Type D: Transfer – Type D exchanges are a type of corporate rebuilding that can incorporate both corporate split-offs or spi.