On March 1 of the current year, Ann, Bill, Cathy and Don form Alphabet Corporation and transfer the following items:

Transferor	Asset	Adjusted Basis to transferor	Fair Market Value	# of shares
Ann	Land	$15,000	$30,000
	Building	$20,000	$90,000
	Mortgage on the land and building	$70,000	$70,000	500
Bob	Equipment	$23,000	$45,000	300
Cathy	Vehicle	$20,000	$15,000	150
Don	Consulting services	$ 0	$5,000	50

Ann purchased the building for $25,000 several years ago and has claimed a depreciation on the building. In addition to 300 shares, Bob also receives a note for $ 5,000. Bob bought the equipment for $50,000 three years ago.

1. What are the consequences to the corporation and each of the shareholders as a consequence of these transfers? What advice do you have for the individuals?
2. Assume the same facts above except Don provides consulting services worth $40,000 for 400 shares. Does your response change? What advice do you have for the individuals?

Answer rating: 100% (QA)

Transferor Asset Adjusted Basis Fair Market Number of GainLoss Purchase price Notes To Transferor Value Shares on Transfer Original Recieved Ann Land ... View the full answer