ACCT 540

Corporate Formations Problem

Mary and Todd form the MT Corporation, with a transfer of the following properties:

Mary $200,000 cash

Todd $200,000 FMV property

$35,000 tax basis

Mary will receive 50% and Todd 50% of the corporate stock.

Complete the following

Mary Todd

Realized gain ______ _______

Recognized gain ______ _______

Basis of Stock ______ _______

MT basis in contributed asset ______ _______

VARIATION 1: Return to original facts (same basis). Todds property is valued at $220,000 but is contributed subject to a $20,000 liability. (This means that Todd still contributes equity of $200,000 so it is still a 50/50 split of ownership.

Complete the following

Mary Todd

Realized gain ______ _______

Recognized gain ______ _______

Basis of Stock ______ _______

MT basis in contributed asset ______ _______

VARIATION 2: Same as Variation 1 (same basis) except Todds property is valued at $260,000 and is contributed subject to a liability of $60,000. (Again, Todd contributes $200,000 of equity)

Complete the following

Mary Todd

Realized gain ______ _______

Recognized gain ______ _______

Basis of Stock ______ _______

MT basis in contributed asset ______ _______