Question: 2. (30 pts). Dan and Edith decide to form X Corp in order to sell real estate that they own on Johns Island. Dan contributes

2. (30 pts). Dan and Edith decide to form X Corp in order to sell real estate that they own

on Johns Island. Dan contributes Parcel 1, which he purchased six months ago for

$150K and now has FMV of $200K and Parcel 2, which he purchased three years ago for

$70K and now has FMV of $200K. In exchange for his contribution, Dan receives 80% of

X Corps 1,000 common shares (worth $350K) plus $50K cash. Edith contributes Parcel

3, which she purchased five years ago for $130K, now has FMV of $180K, and is subject

to a $110K mortgage. In exchange for her contribution, Edith receives 20% of X Corps

1,000 common shares (worth $70K).

a. What are the tax consequences to Dan, Edith and X Corp?

b. What if Parcel 1 had a FMV of $300K (basis is still $150K), and in exchange for his

contribution, Dan receives 80% of X Corps 1,000 common shares (worth $350K)

plus $150K cash?

c. What if Ediths parcel (Parcel 3) was subject to a mortgage of $150K?

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