Jones, Able, and Smith want to form Shriver Corporation. They want to accomplish this in the most tax efficient (least costly) way possible. They have asked for advice. The counselor will receive \(\$ 10,000\) (in stocks and bonds). The relevant information follows. Each bond has a face value of \(\$ 2500\).

Determine all tax consequences for Jones, Able, Smith, the counselor, and Shriver Corporation assuming the transfer occurred in 2018. Also assume that Jones, Able, and Smith are unrelated parties.

Transcribed Image Text:

PARTY Jones Machine Land PARTY Able Machine GIVES Fair Market Adjusted Value Basis $100,000 $70,000* 40,000 20,000 Building 65,000 45,000** (2) $20,000 * Acquired for $85,000, straight-line depreciation taken. * Acquired for $70,000, straight-line depreciation taken; liability of $60,000 is assumed by Shriver Corporation, Building GIVES Fair Market Value $70,000 RECEIVES Adjusted Basis $80,000* (1) 25 shares of stock RECEIVES (1) Eight shares of stock 50,000 65,000** (2) Two 10-year bonds (3) $5,000 * Acquired for $95,000; straight-line depreciation taken ** Acquired for $75,000; straight-line depreciation taken, liability of $70,000 is on the property.