Sam Rogers forms a corporation. Sam transfers to the corporation property having a basis to him of
Question:
Sam Rogers forms a corporation. Sam transfers to the corporation property having a basis to him of $15,000 and a fair market value of $27,000 for 900 shares of the $10 par stock of the corporation. A year later, Bill Morrison, who is not related to Sam, transfers property having a basis to him of $1,000 and a fair market value of $3,000 for 100 shares of the corporate stock. The corporation issued no other stock.
a. How much gain does Sam recognize on his exchange? What is the basis to Sam of his 900 shares?
b. How much gain does Bill recognize on his exchange? What is the basis to Bill of his 100 shares?
c. What gain or loss is recognized by the corporation when it issues its shares to Sam? What is the basis to the corporation of the property it received from Sam?
d. What is the gain or loss recognized by the corporation when it issues its shares to Bill? What is the basis to the corporation of the property it received from Bill?
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
South Western Federal Taxation 2017 Comprehensive
ISBN: 9781305874169
40th Edition
Authors: William H. Hoffman, David M. Maloney, William A. Raabe, James C. Young