Hillary owns equipment constituting Section 1231 property with FMV of $700,000 and A/B of $300,000. Hillary contributes the equipment to a corporation (“Opco”) in exchange for (i) 100% of Opco’s stock with FMV of $600,000 and (ii) cash of $100,000. If Hillary had sold the equipment to a third party for $700,000 of cash (instead of contributing it to Opco), she would have recognized $400,000 of ordinary income under the depreciation recapture rules of Section 1245(a)(1).
4. How much gain (if any) is recognized by Hillary upon the exchange? As part of your answer, please indicate the character of any such gain.
5. What is Hillary’s A/B in the Opco shares received in this transaction (measured immediately after the exchange)?
6. What is Opco’s A/B in the equipment contributed by Hillary (measured immediately after the exchange)?

Answer rating: 100% (QA)

Answer 4 Gain recognized by Hillarys in respect of Cash 100000 Character standard financial gain Sto... View the full answer