A, B, and C form X Corporation by transferring the following assets, each of which has been held long-term: 

 

Transferor       Asset                                                   Adj. Basis         F.M.V.

A                      Equipment (all § 1245 gain)               $15,000           $22,000

B                      Inventory                                            $7,000             $20,000

                        Land                                                    $13,000           $10,000

C                      Land                                                    $20,000           $50,000

 

In exchange, A receives 15 shares of X common stock (value -- $15,000), $2,000 cash and 100 shares of X preferred stock (value -- $5,000), B receives 15 shares of X common stock (value - $15,000) and $15,000 cash, and C receives 10 shares of X common stock (value -- $10,000), $5,000 cash and X's note for $35,000, payable in two years. None of the transferors is a "dealer" in real estate. Assume that the preferred stock issued to A is not "nonqualified preferred stock."

 

(a) What are the tax consequences (gain or loss realized and recognized, basis and holding period) of the transfers described above to each shareholder and to X Corporation?

 

(b) What result to C in (a) above, if instead of land, C transferred depreciable equipment with the same adjusted basis and fair market value as the land and an original cost to C of $50,000? See § 453 (i)

Answer rating: 100% (QA)

ANSWER a For shareholder A A realized a gain of 7000 22000 15000 on the transfer of equipment This g... View the full answer