Sam and Trang Are Going to Establish a Business

question 99

Essay

Sam and Trang are going to establish a business. Sam will contribute cash of $100,000 for a 50% interest, and Trang will contribute land and a building worth $135,000 adjusted basis of $65,000) for a 50% interest. The land and building are encumbered by a $35,000 mortgage, which the entity assumes. Determine the tax consequences of the contribution to Sam, Trang, and the entity if the business is:
a. An S corporation.
b. A partnership.
c. A C corporation.

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Definitions:

Negative Punishment

A type of behavior modification that involves the removal of a desirable stimulus after a behavior to decrease the likelihood of that behavior occurring again.

Negative Reinforcement

A behavioral principle where the removal of an unfavorable event or outcome after the display of a behavior increases the likelihood of that behavior in the future.

Negative Expectation

The anticipation of undesirable outcomes or results in a given situation, which can influence one's perception and behavior.

Learned Helplessness

A condition in which a person or animal has learned to behave helplessly, failing to respond even though there are opportunities to avoid unpleasant circumstances or gain positive rewards.