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Otis is the CEO of Rectify, Inc., a private foundation. Otis invests $500,000 (80%) of the foundation’s investment portfolio in derivatives. Previously, the $500,000 had been invested in corporate bonds with an AA rating that earned 7% per annum. If the derivatives...

For each of the following organizations, determine its UBTI and any related UBIT. a. AIDS, Inc., an exempt charitable organization that provides support for individuals with AIDS, operates a retail medical supply store open to the general public. The net income of the...

At the time of its liquidation under § 332, Cardinal Corporation (E & P of $560,000) had the following assets and liabilities: cash ($175,000); marketable securities (fair market value of $230,000, basis of $250,000); unimproved land (fair market value of...

The JM Partnership was formed to acquire land and subdivide it as residential housing lots. On March 1, 2012, Jessica contributed land valued at $600,000 to the partnership, in exchange for a 50% interest in JM. She had purchased the land in 2004 for $420,000 and held...

In 2012, Tim and Molly form TM Partnership, Ltd. (an LLLP), to own and operate certain real estate. Tim contributed land, and Molly contributed cash to be used for setting up the entity and creating a plan for developing the property. Once a development plan was in...

Finch, Inc., a calendar year general contractor, and Cardinal, Inc., a development corporation with a July 31 year end, formed the equal FC, LLC, on January 1 of the current year. Both LLC members are C corporations. The LLC was formed to construct and lease shopping...

On July 1 of the current year, the R & R Partnership (an LLLP) was formed to operate a bed and breakfast inn. The partnership paid $3,000 in legal fees for drafting the partnership agreement and $5,000 for accounting fees related to organizing the entity. It also...

Phoebe and Parker are equal members in Phoenix Investors, LLC. They are real estate investors who formed the LLC several years ago with equal cash contributions. Phoenix then purchased a piece of land. On January 1 of the current year, to acquire a one third interest...

The KL Partnership is owned equally by Kayla and Lisa. Kayla’s basis is $20,000 at the beginning of the tax year. Lisa’s basis is $16,000 at the beginning of the year. KL reported the following income and expenses for the current tax year: Sales revenue $150,000 Cost...