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In: Finance

I, an individual formed X corporation on January 1 of year 1 by contributing $100 of...

I, an individual formed X corporation on January 1 of year 1 by contributing $100 of manager’s service and a stock in Y corporation (representing 1% ownership in Y) with a FMV of $500 and adjusted basis of $600 and an ordinary asset with a FMV of $500 and an adjusted basis of $450 to X in exchange for 11 shares of X stock. I was the only shareholder. In addition to the above, during Year 1, the following transactions occurred. During year 1, you may assume X is a qualified small business corporation at all times

Year 1

X earned $250 revenue.

On July 1, X received a $50 dividend from Y Corp.

On January, X purchase section 179 asset for $100.00.

On October 31, X distributed $50 cash to I

Year 2

X earned $100 revenue

X received a $50 dividend distribution from Y Corp.

On May 5 X distributed $100 cash to I

On July 1 I sold his shares to J for $650

On October 31 X distributed $100 cash to J

On December 30 X sold Y Corp stock for $450.

Question:

1. What income, gain or loss, including character, does I recognize as a result of the sale of X’s stock for $650?

2. What income, gain or loss, if any does J recognize as a result of the $100 distribution in Year 2?

Solutions

Expert Solution

jeff jeffy answered 1 year ago
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