Mr. Sam Moyer owns the following assets in a business that he wants to incorporate:

¹Cost values for tax purposes used to describe the lowest limit of the elected transfer price range in Exhibit 16-1.

As fair market value consideration, he wants $70,000 in new debt, $35,000 in preferred shares and the balance in common shares to total the fair market value of the net assets transferred to the corporation. Also, the corporation will assume the existing debt of the proprietorship.

REQUIRED

Indicate the appropriate elected amounts which should be used to defer any taxation upon the incorporation of the proprietorship.

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Short-term investments Inventory Machinery (cost: $54,375) Goodwill Liabilities Tax value¹ $15,000 45,000 26,250 $86,250 10,000 $76,250 Fair market value $18,000 46,000 38,500 30,000 $132,500 10,000 $122,500