Question

In: Accounting

13. Mary contributed a building (FMV: $1,000,000, adjusted based: $800,000) to a Corporation in exchange for...

13. Mary contributed a building (FMV: $1,000,000, adjusted based: $800,000) to a Corporation in exchange for only stocks (FMV: $1,000,000) and obtained 100% of voting power.

Gain Realized=

Gain Recognized=

14. Same transactions in #13 except that Mary received $900,000 of stock and $100,000 of luxurious vehicle.

Gain Realized=

Gain Recognized=

15. Same transactions in #2 except that Mary received $700,000 of stock and $300,000 of luxurious vehicle.

Gain Realized

Gain Recognized

16. Same transactions in #2 except that Mary received $900,000 of stock and $100,000 of corporate debt.

Gain Realized

Gain Recognized

17. Mary provides building (FMV: $1,000,000, adjusted based: $800,000) and management service to a corporation in exchange for only stocks (FMV: $100,000) and obtained 100% of voting Power.

Gain Realized

Gain Recognized

Ordinary Income

Solutions

Expert Solution

Solution 13:

As per section 351, neither gain or loss is recognized upon transfer of property to a corporation solely in exchange of stock in that corporation if immediately after the exchange, transferor control the corporation. If transferor gets boot (assets other than stock) then gain is recognized lessor of FMV of asset received or gain realized.

Therefore in given question

Adjusted basis of building = $800,000

FMV of stock received = $1,000,000

Hence realized gain = $1,000,000 - $800,000 = $200,000

Recognized gain = $0

Solution 14:

FMV of vehicle received = $100,000

Realized gain = $1,000,000 - $800,000 = $200,000

Recognized gain = Lessor of FMV of vehile i.e. $100,000 or gain realized i,e, $200,000

Hence recoginzed gain = $100,000

Solution 15:

FMV of vehicle received = $300,000

Realized gain = $1,000,000 - $800,000 = $200,000

Recognized gain = Lessor of FMV of vehile i.e. $300,000 or gain realized i,e, $200,000

Hence recoginzed gain = $200,000

Solution 16:

Value of corporate debt received = $100,000

Realized gain = $1,000,000 - $800,000 = $200,000

Recognized gain = Lessor of value of corporate debt i.e. $100,000 or gain realized i,e, $200,000

Hence recoginzed gain = $100,000

ekkarill92 answered 1 year ago

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