Question: Able and Body are unrelated individuals. In September of the present year, they decide to form I Can Too Corporation. Able contributes a building and
Able and Body are unrelated individuals. In September of the present year, they decide to form I Can Too Corporation. Able contributes a building and land with a basis of $35,000 and and a fair market value of $100,000, and a mortgage of $45,000. Body contributes machinery with a basis of $55,000 and a fair market value of $100,000, and the Corporation assumes a loan of $40,000 used for personal reasons by Body. They each receive 1,000 shares of the single class of the corporation’s par $100 common stock. Assume each share is worth $100
Answer the following questions:
- Do any or all of the shareholders realize and recognize gain or loss on this transaction?
- What is Able’s adjusted basis in his shares
- What is Body’s adjusted basis in his shares?
- What is I Can Too’s adjusted basis in the building and land contributed by Able?
- What is I Can Too’s adjust the basis in the machinery contributed by Body?
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