110) Norman transfers machinery that has a $45,000 basis and a $105,000 FMV and $30,000 in money to Elnor Corporation in exchange for 50 shares of Elnor stock. The machinery, used in Norman's business, originally cost him $150,000 and is subject to a $84,000 liability which Elnor Corporation assumes. Kate exchanges $51,000 cash for the remaining 50 shares of Elnor stock.

a)What is the amount and character of Norman's recognized gain or loss?

b)What is his basis in the Elnor stock?

c)What is Elnor's basis in the machinery?

d)What is the amount and character of Kate's recognized gain or loss?

e)What is Kate's basis in the Elnor stock?

f) When do Norman and Kate's holding periods for their stock begin?

111) What is the impact on a transferor if a Sec. 351 exchange involves the assumption of the shareholder's liabilities by the corporation?

112) What is the tax treatment for a contribution of capital to a corporation by a nonshareholder?

113) Why would a transferor want to avoid the nonrecognition of gain under Sec. 351? How can the nonrecognition provision of Sec. 351 be avoided?

114) Discuss the tax planning opportunities that are available in forming a corporation when one of the parties owns property that has a high basis and a low FMV.

Answer rating: 100% (QA)

a Normans recognized gain or loss can be calculated as follows FMV of stock ... View the full answer