In: Accounting
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
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