Question

Jones transfers contributed three properties, A, B and C, to Newco and that the FMV of each was $160,000, 55,000 and $35,000, respectively and the adjusted basis of each property was $140,000, $90,000 and $80,000, respectively. What are the tax consequences to Jones and Newco

Answer 1

FAIR MARKET VALUE=250000(160000+55000+35000)

Adjusted basis of each property=310000(140000+90000+80000)

difference =60000

TAX CONSEQUENCE OF jones

AS the jones is the seller and he contributed of FMV was total 250000 amd adjusted basis total is 310000 .as taxable asset is sold for less than adjusted basis  a capital  loss of 60000 on taxable asset .And it will minues if any capital gain will occur.

TAX CONSEQUENCE OF NEWCO

As the company taken 3 properties it will depreciate over its useful life .Depreciation reduces the amount of taxes a company pays  via tax deduction .A company's depreciation expenses reduces the amount of earnings on which taxes are based,the larger the depreciation expense,the lower the taxable income and the lower a company's bil.the smaller the depreciation expenses the higher the taxable income amd the higher the tax payment owned