Hazel transferred the following assets to Starling Corporation: Adjusted ...........Basis Fair ..........Market Value Cash .................$100,000 ..................$100,000 Machinery
Question:
Hazel transferred the following assets to Starling Corporation:
Adjusted ...........Basis Fair ..........Market Value
Cash .................$100,000 ..................$100,000
Machinery .....$60,000 ...........$ 40,000
Land ...............$100,000 .................$150,000
In exchange, Hazel received 50% of Starling Corporation's only class of stock outstanding. The stock has no established value.
However, all parties sincerely believe that the value of the stock Hazel received is the equivalent of the value of the assets she transferred.
The only other shareholder, Rick, formed Starling Corporation five years ago. What are the income tax consequences to Hazel and Starling Corporation with regard to the exchange.
South Western Federal Taxation 2015 Essentials of Taxation Individuals and Business Entities
ISBN: 9781285438290
18th edition
Authors: James Smith, William Raabe, David Maloney, James Young