Marietta and Alpharetta Corporation,two Accrual Method of Accounting Corporations That

question 91

Essay

Marietta and Alpharetta Corporation,two accrual method of accounting corporations that use the calendar year as their tax year,have filed consolidated tax returns for a number of years.Alpharetta Corporation,a 100% owned subsidiary of Marietta,is transferring a patent,equipment,and working capital to newly created Georgia Corporation in exchange for 100% of its stock.In 2011,the corporation will begin to produce parts for the computer industry.Georgia Corporation expects to incur organizational expenditures of $10,000 and start-up expenditures of $60,000.What tax issues should Georgia Corporation consider with respect to the selection of its overall accounting method,inventory method,and tax year,and the proper reporting of its organizational and start-up expenditures?

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Definitions:

UCC

The Uniform Commercial Code, a comprehensive set of laws governing all commercial transactions in the United States, intended to standardize and simplify transaction laws across states.

Sale or Return

A transaction in which goods are provided to a buyer on the basis that unsold goods can be returned to the seller.

Security Interest

A legal claim or right on property as collateral to secure the repayment of a debt or obligation.

Buyer in the Ordinary Course

An individual or entity that purchases goods in good faith, within the normal course of business from a seller who is in the business of selling such goods.