Week Four Discussion Questions

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Question one: – chapter 9

 

o    Sue and Bill plan to open an accounting firm and expect to work full time in the firm. They expect to incur a small loss during their first year of operation and expect to be profitable after the first year. What are the tax law requirements for structuring the business as a partnership or an S corporation? Which would you recommend and why?

 

Question two: – chapter 9

 

o    Bob and Dave plan to start a business. Bob will contribute land and Dave will contribute services. Would you recommend this business be formed as a partnership or as an S corporation? Why?

 

Question three: – chapter 11

 

o    The corporation owns a building with a $160,000 adjusted basis and $120,000 fair market value. The company has earnings and profits of $200,000. Is it more advantageous for the company to sell the property and distribute the sales proceeds to its shareholders or distribute the property to its shareholders and let them sell the property? Why? If you were a shareholder, what would be most advantageous to you?

 

Question four: – chapter 11

 

What is the difference between a distribution and a distributive share? How do these affect the owner’s K-1 and individual taxes?

 

 

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