In: Accounting
Karen transfers to Bravo Corporation $3,000 cash and machinery having an $8,000 basis and a $33,000 FMV in exchange for 80 shares of Bravo stock. The machinery was used in Karen's business, originally cost Karen $41,000, and is subject to a $15,000 liability, which Bravo assumes. Ben exchanges $ 21,000 cash for the remaining 80 shares of Bravo stock. |
a. What are the amount and character of Karen's recognized gain or loss? |
b. What is Karen's basis in the Bravo Stock? |
c. What is Bravo's basis in the machinery? |
d. What are the amount and character of Ben's recognized gain or loss? |
e What is Ben's basis in the Bravo stock? |
f. When do Karen and Ben's holding periods for their stock begin? |
g. How would your answers to Parts a through f change if Ben received $21,000 of Bravo stock for legal services (instead of cash)? |