Federal Income Tax 2 – Discussion W4

No gain or loss shall be realized if the property is transferred to a corporation. The
transfer might be carried out by one or more individuals in exchange for stock. Immediately after
the completion of the assignment, such individuals will be in control of the corporation. The
distribution of cash and property to stakeholders will be treated differently due to liquidations.
The money is more liquid than the property, such as assets, which will take time to liquidate. In
settlement of the distribution, costs are incurred and are treated as deductibles.
How the differing treatment is handled matters to the shareholders as they may either
gain or lose based on the decision they make. The stock and other equity interests that are within
the corporation will provide evidence for indebtedness and futures contracts. The state of the
indebtedness will primarily affect the shareholders in the company. There are several reasons
why organizations prefer to do their business as corporations. The main reason is due to the
limitations on the liability. Such is where the shareholders of the company will be legally
responsible for the debt of the corporation to the extent of nominal value.
In corporations, the company is generally is taxed based on the earning or the profits it
makes. The shareholders, on the other hand, are also imposed based on the dividends that they
receive for the corporation’s earnings. The corporate income tax rate was reduced to 35% to
25%. Bonuses that are distributed by corporations are profits and not the expenses, and thus they
are not deductible. Therefore, the corporation makes payments of the corporate income tax on
the benefits which are distributed to the shareholders.