Viola and Sebastian agree to form Sail Away, Inc., a small family boat rental business. Viola contributes
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Viola and Sebastian agree to form Sail Away, Inc., a small family boat rental business. Viola contributes 20 sailboats purchased for $70,000 but worth $170,000 at the time of incorporation. Sebastian contributes a small piece of waterfront property and a dock purchased many years ago for $30,000, with a fair market value of $150,000 plus cash of $20,000. In return for the contributions, each receives 50% of the 200 authorized common shares of Sail Away stock.
- What are the tax consequences to Viola, Sebastian, and Sail Away, Inc.?
- What if Viola’s sailboats were originally purchased for $180,000?
- What if Sebastian’s contribution consisted of services worth $70,000 and property worth $100,000 (basis still $30,000)? What if he contributed only services valued at $170,000?
- What if Viola made her contribution in exchange for $160,000 worth of stock plus a Sail Away security valued at $10,000. How would your answer change if Viola’s basis in the property contributed had been $180,000?
Related Book For
South Western Federal Taxation 2016 Corporations Partnerships Estates and Trusts
ISBN: 9781305399884
39th edition
Authors: James Boyd, William Hoffman, Raabe, David Maloney, Young
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