Recap Corp has assets worth $500 with an adjusted basis of $125, The company has common...

Recap Corp has assets worth $500 with an adjusted basis of $125, The company has common stock outstanding and bonds held by creditors, including some bonds held by shareholders. Ernie, a bondholder exchanges $100,000 of 5% bonds in exchange for $100,000 of voting stock in Recap. His basis in the bonds was 95,000.

1, Does Ernie recognize gain or loss on the exchange and if so how much?

2. What is Ernie’s basis in the stock he receives?

3. Suppose instead Ernie was a common stock shareholder. His basis in the stock was $92,000. He exchanges the stock for $100,000 in Recap 3% bonds worth $98,000. What if any gain or loss does Ernie recognize?

4. If Recap changes its name to Pacer does Pacer (formerly known as Recap) recognize gain or loss, and what is the adjusted basis of the assets inside it?

Expert Solution

ekkarill92 answered 2 years ago

Vic owns land worth $450 in which she has a basis of $125. The land is...

Vic owns land worth $450 in which she has a basis of $125. The land is subject to a mortgage of $100 which Vic took out several years ago in order to buy the land. She transfers the land to Bari Corp in exchange for all its common stock work $350, and Bari assumes the mortgage. Does Vic recognize gain on the transfer and if yes, how much? No, section 351 deferred gain What is Vic’s basis in the stock?...

1. Estimatint Net Worth. Mia has $3000 in assets, a finance company loan for $500, and...

1. Estimatint Net Worth. Mia has $3000 in assets, a finance company loan for $500, and an outstanding credit card balance of $135. Mia‘s monthly cash inflows are $2000, and she has monthly expenses of $1650. What is Mia‘s net worth? ( Round to Nearest Dollar) 2. estimating net worth. At the beginning of the year Lakynn had a net worth of 4500. During the year she set aside $80 per month from her paycheque for savings. In December, she...

Stacy is interested in purchasing Spud's Potato Chip Company. Spud's assets are: Adjusted Basis Fair market...

Stacy is interested in purchasing Spud's Potato Chip Company. Spud's assets are: Adjusted Basis Fair market Value Cash 2,300 2,300 Inventory 16,500 19,200 Equipment 13,000 9,000 Land 10,000 40,500 Building 66,600 129,000 Total $108,400 $200,000 1. Prepare a table showing the basis of each asset if Stacy pays a total of $240,000 for all the assets. 2. Prepare a table showing the basis of each asset if Stacy buys all the stock of Spud's for $240,000.

Mort owns 500 shares of Pear, Inc. stock with an adjusted basis of $22,000. On July...

Mort owns 500 shares of Pear, Inc. stock with an adjusted basis of $22,000. On July 28, 2020, he sells 100 shares for $3,000. On August 16, 2020, he purchases another 100 shares for $3,400. Select the best answer below based on the fact pattern A. Mort has a tax loss of $1,400 and his basis on shares purchased on August 16 is $3,000 B. Mort's adjusted basis for the 100 shares purchased on August 16 is $4,800 and he...

TJ Magnasen contributed assets with a $200,000 adjusted basis and a $525,000 FMV to Adelante Corporation...

TJ Magnasen contributed assets with a $200,000 adjusted basis and a $525,000 FMV to Adelante Corporation in exchange for all of its stock. The corporation conducted operations for five years and was liquidated. TJ received the following in a liquidating distribution: $615,000 cash (less federal income taxes of 21% owed on the liquidation by the corporation) The assets that he had originally contributed, which now have a $150,000 adjusted basis and a $615,000 FMV. a) What are the tax consequences...

A partnership has the following assets and liabilities. The book basis and tax basis are the...

A partnership has the following assets and liabilities. The book basis and tax basis are the same amount. Aseet Basis Value Building 90,000 92,000 Accounts payable 8,000 8,000 Note Payable 85,000 85,000 Total 183,000 185,000 If the note payable is a nonrecourse mortgage on the building, what is the amount of the minimum gain?

A partnership has the following assets. The book basis and tax basis are the same amount...

A partnership has the following assets. The book basis and tax basis are the same amount Asset. Basis. Value Cash. 3000. 3000 Machine 10000. 10000 Accounts payable 8000. 8000 Note payable. 15000. 15000 Total 36000. 36000 If the note payable is a recourse mortgage on the machine wat is te amount of minimum gain A. 0 B. 5000 C. 10000 D. 13000

Cliff Corp (CC) is a relatively risky firm that will have assets worth next year either...

Cliff Corp (CC) is a relatively risky firm that will have assets worth next year either $100 million, $120 million or $330 million with equal probability. Given the risk, the required rate of return on firm assets is 18%. CC also has two outstanding bonds: senior bonds with a face value $95 million cost of debt of 4% and junior debt with a face value of $30 million and a cost of debt of 12%. If CC defaults on either...

Faldo Corp. is a public company and has 100,000 common shares outstanding. In 2020, the company...

Faldo Corp. is a public company and has 100,000 common shares outstanding. In 2020, the company reported income from continuing operations before income tax of $2,710,000. Additional transactions not considered in the $2,710,000 are as follows: 1. In 2020, Faldo Corp. sold equipment for $140,000. The machine had originally cost $80,000 and had accumulated depreciation to date of $36,000. 2. The company discontinued operations of one of its subsidiaries during the current year at a loss of $290,000 before tax....

XY Partnership has the following assets and liabilities at year-end. The book basis and tax basis...

XY Partnership has the following assets and liabilities at year-end. The book basis and tax basis are the same amount. Assets Basis Value Machine $ 10,000 $ 5,000 Building $80,000 $ 82,000 Note 1 $ 3,000 $ 3,000 Note 2 $90,000 $ 90,000 Note 1 is a nonrecourse note attached to the machine; Note 2 is a nonrecourse note attached to the building. What is the amount of the partnership's minimum gain? A. $0 B. $3,000 C. $6,000 D. $10,000

Question