A finished ACC-465 Topic 4 related party transaction review example, testing four owner dealings against sections 267, 707(c), 7872 and reasonable compensation guidance, and stating each consequence in figures. Searches like "acc 465 topic 4 assignment example", "acc465 topic 4 sample" and "acc-465 topic 4 example" land here.
What a finished ACC-465 Topic 4 related party transaction review looks like
The finished review takes four transactions and gives each its rule and its consequence. An owner sells land with a $90,000 basis to her wholly owned corporation for $70,000; section 267 disallows the $20,000 loss, and when the corporation later sells for $85,000, its $15,000 gain is offset by the disallowed amount while the remaining $5,000 is lost. A partner receives $48,000 of guaranteed payments, deductible by the partnership and ordinary income to him under section 707(c) whatever the partnership earns. An S corporation owner draws $120,000 of distributions and no wages; the review cites IRS guidance on reasonable compensation and explains why part may be recharacterized, without inventing a figure. A $100,000 interest-free loan to an owner brings imputed interest under section 7872 at the applicable federal rate.
How an ACC-465 Topic 4 example is structured
Each transaction occupies one block with the same four parts. The block opens with the arrangement as the owners described it and the benefit they expected, since the provision exists to answer that expectation. The governing rule comes next, with the relationship that triggers it, such as more than 50 percent ownership for the loss disallowance. The consequence follows in figures wherever the facts allow, and in direction where a rate would otherwise have to be invented. Each block closes with what the owners could have done within the rules, stated as an observation rather than a plan. After the four blocks, a short table lists the transactions, the provision, the owners' expected result and the actual result. A final paragraph notes that related-party rules recur throughout later planning courses, and that this review stays at the level of identifying and applying them.
The expected benefit stated first
Each block begins with what the owners thought the transaction would achieve, which makes plain what the governing provision was written to prevent.
Relationship tested before the rule
Ownership percentages are checked before any provision is applied, since section 267 and section 7872 each reach only the relationships they define.
A disallowed loss followed forward
The land loss is traced to the corporation's later sale, showing $15,000 of the disallowed amount used against gain and $5,000 never recovered by anyone.
Guaranteed payments treated as ordinary
The partner's $48,000 is income to him and a deduction to the partnership regardless of profit, and the review sets it beside his distributive share.
Reasonable compensation left unquantified
The review explains why distributions in place of wages invite recharacterization and declines to state a salary figure the facts cannot support.
Where marks go in ACC-465 Topic 4
Presenting a plan as sound when the Code would disallow it loses more marks here than any arithmetic slip. A paper that deducts the $20,000 land loss has ignored the relationship that section 267 turns on, and one that treats the loss as permanently gone misses the offset against the corporation's later gain. Guaranteed payments treated as distributions understate the partner's ordinary income and overstate the partnership's. The S corporation case is where papers most often overreach, stating a precise salary the IRS would accept when the guidance offers factors rather than a number. Loans described as interest-free with no mention of section 7872 treat an arrangement the Code specifically reaches as a private matter. Reviews that name each provision without stating its consequence in figures or direction tell the owners a rule exists without telling them its price.
Get an ACC-465 Topic 4 example written to your instructions
Send the ACC-465 Topic 4 instructions, your rubric and the owner transactions in your case. A custom example is written to them, with each relationship tested, the governing provision applied, the consequence stated in figures or direction, and the expected result set against the actual one, back in 24 to 48 hours. The first one is free.
ACC-465 Topic 4 questions, answered
Why is the land loss partly recovered and partly lost?
Section 267 disallows a loss on a sale between related parties, but the buyer may use the disallowed amount to reduce its own gain when it later sells the property. The corporation's $15,000 gain absorbs $15,000 of the $20,000. Nothing absorbs the remaining $5,000, because the rule offsets gain only and never creates a loss for the buyer. The example traces both parts.
What counts as reasonable compensation for an S corporation owner?
There is no formula in the Code. IRS guidance and court decisions look at factors such as the owner's duties, time spent, experience and what comparable businesses pay for similar services. The example therefore explains the risk and the factors without stating a salary, since any figure would be invented. An actual determination depends on facts and professional judgment well beyond a coursework case.
Does section 7872 apply to every loan between an owner and a business?
It reaches below-market loans in the categories it defines, including loans between a corporation and its shareholders, and it contains exceptions that depend on loan size and purpose. The example flags that the exceptions exist, applies the general rule to a $100,000 loan and leaves the rate as the applicable federal rate for the period, since that rate is published monthly and changes.