Question

1. The Metallic Corporation generated a long-term capital gain of $100,000 and a long-term capital loss of $50,000. The amount of tax applicable to the net capital gain resulting from these two transactions is:

   		a. $21,000.
   		b. $15,000.
   		c. $7,500.
   		c. $10,500.

2. Two months after Justin incorporates his sole proprietorship (becoming) a 100% owner of the new corporation, he decides to give 30% of his stock in the corporation to his children. Section 351 cannot apply to Justin’s incorporation because he has not satisfied the 80% control requirement.

   		a. True
   		b. False

Answer 1

Question - (1)

Answer -

Step - (1) - Information Given :-

The Metallic Corporation generated a long-term capital gain of $100000 and a long-term capital loss of $50000.

Step - (2) - Calculation of the amount of tax on net capital gain :-

Capital gains realizations were 21% of income subject to tax for U.S. corporations.

Tax = (Long-term capital gain - Long-term capital loss) * 21%

= ($100000 - $50000) * 21%

= $50000 * 21%

= $10500

Hence, Option - (d) is Correct.