Enrique, Darlene, and Jason form Baltic Corporation by transferring these assets:

Name Contributes Basis FMV #of shares Notes

Enrique Inventory $15,000 $25,000 50 (1)

Land $40,000 $30,000

Darlene Equipment $ 5,000 $25,000 10 (2)

Jason Land $35,000 $50,000 40 (3)

Notes:

(1) Enrique also received $5,000 cash.

(2) Darlene also received $15,000 in cash. All gain on the equipmentis attributable to depreciation (Sec. 1245)

(3) Jason also received $10,000 cash

Questions:

1. What are the tax consequences (gain or loss realized, gain or loss recognized, basis, and holding period in the stock received) to each of the transferors?

2. What are the tax consequences (gain or loss realized, gain or loss recognized, basis and holding period in the assets received) to the corporation?

3. What is the tax result to Jason in (a), above, if instead of land, he transferred depreciable equipment with the same adjusted basis and fair market value as the land and an original cost of $50,000? (Hint: See § 453(i))

Answer rating: 100% (QA)

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