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:

1. Do any or all of the shareholders realize and recognize gain or loss on this transaction?
2. What is Able’s adjusted basis in his shares
3. What is Body’s adjusted basis in his shares?
4. What is I Can Too’s adjusted basis in the building and land contributed by Able?
5. What is I Can Too’s adjust the basis in the machinery contributed by Body?

Answer rating: 100% (QA)

Lets address each question step by step Realization and Recognition of Gain or Loss Able contributes ... View the full answer