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In: Accounting

Connie and Doris form calendar year Wolf Corporation on January 1 of the current year through...

Connie and Doris form calendar year Wolf Corporation on January 1 of the current year through the following

transfers of property and services:

From Connie:   

From Connie Basis to Transfer Fair market Value Number of shares
Professional Services: 0 22000 22
Cash 3000 3000 3
From Doris Basis FMV Number of Shares
Land( Held as future building site) 56,000 78,000 78

Assume the value of each share of Wolf Corporation stock is $1,000.

a.

How much income or gain, if any, must Connie recognize? What is its character if recognized?

b.

What basis will Connie have in her Wolf stock?

c.

What holding period does Connie take in the Wolf stock?

d.

Assuming the professional services qualify as organizational expenses and an appropriate

elections is made, how much can Wolf deduct in the current year?

e.

How much gain or loss does Doris recognize? What is its character if recognized?

f.

What basis will Doris have in the Wolf stock?

g.

What holding period will Doris have in the stock?

h.

What basis will Wolf Corporation have in the land?

i.

What holding period will Wolf have in the land?

Solutions

Expert Solution

a.How much income or gain, if any, must Connie recognize? What is its character if recognized?

Connie recognize income of $22,000. Its character is ordinary income.

b.What basis will Connie have in her Wolf stock?

basis of $3,000

c.What holding period does Connie take in the Wolf stock?

Holding period commence from first day from exchange date.

d.Assuming the professional services qualify as organizational expenses and an appropriate

elections is made, how much can Wolf deduct in the current year?

Wolf deduct in the current year for organizational expenses. Hence eligible for $4,000.

e.How much gain or loss does Doris recognize? What is its character if recognized?

Caoital gain of $22,000.

f.What basis will Doris have in the Wolf stock?

Doris basis was $56,000.

g.What holding period will Doris have in the stock?

h. Holding period commence from first day from exchange date.

What basis will Wolf Corporation have in the land?

i.e. $56,000

What holding period will Wolf have in the land?

f. holding period for Wolf will be The Holding period commence from first day from exchange date.

ekkarill92 answered 1 year ago
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