Quail Corporation was created in 2005 through contributions from Kasha ($900,000) and Frank ($100,000). In a transaction
Question:
Quail Corporation was created in 2005 through contributions from Kasha ($900,000) and Frank ($100,000). In a transaction qualifying as a reorganization, Quail exchanges all of its assets currently valued at $1.8 million (basis of $1.2 million) for Covey Corporation stock valued at $1.7 million plus $100,000 in Covey bonds. Quail distributes the Covey stock and bonds proportionately to Frank and Kasha in exchange for their stock in Quail. Quail's current and accumulated E & P before the reorganization amounts to $70,000.
a. How do Kasha and Frank treat this transaction for income tax purposes? What is Kasha's and Frank's basis in their Covey stock?
b. How do Quail and Covey treat this transaction for income tax purposes? What is Covey's basis in the assets it receives from Quail?
CorporationA Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
South Western Federal Taxation 2016 Corporations Partnerships Estates And Trusts
ISBN: 9781305399884
39th Edition
Authors: James Boyd, William Hoffman, Raabe, David Maloney, Young