A organized X Corporation by transferring the following: inventory with a basis of $20,000 and a fair
Question:
A organized X Corporation by transferring the following: inventory with a basis of $20,000 and a fair market value of $10,000 and unimproved land held for several years with a basis of $20,000, a fair market value of $40,000 and subject to a recourse debt of $30,000. In return, A received 20 shares of X stock (fair market value, $20,000) and X took the land subject to the debt.
(a)Assuming no application of Section 357(b), how much gain, if any, does A recognize and what is A’s basis and holding period in the stock?
(b)What result in (a), above, if the basis of the land were only $5,000?
(c)In (b), above, what is the character of A’s recognized gain under Reg. § 1.357–2(b)? Does this result make sense? How else might the character of A’s gain be determined?
(d)In (b), above, what is X Corporation’s basis in the properties received from A?
(e)What might A have done to avoid the recognition of gain in (b), above?
Vector Mechanics for Engineers Statics and Dynamics
ISBN: 978-0073212227
8th Edition
Authors: Ferdinand Beer, E. Russell Johnston, Jr., Elliot Eisenberg, William Clausen, David Mazurek, Phillip Cornwell