During the current year, Mary and Cora form Downton Corporation and transfer the following property, each of
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Question:
- During the current year, Mary and Cora form Downton Corporation and transfer the following property, each of which has been held long-term:
Transferor | Asset | Transferor's Adjusted Basis | Fair Market Value | Consideration Received |
Mary | Cash | $8,000 | $8,000 | 200 shares of Downton stock |
Cora | Undeveloped Land | $21,000 | $27,000 | 800 shares of Downton stock and $4,000 cash |
Inventory | $12,000 | $9,000 |
Instructions:
- Does the exchange qualify as an IRC Sec. 351 non-recognition transaction?
- What are the following tax consequences of the property transfers outlined above for the shareholders, Mary and Cora? What is Mary and Cora's Gain/loss recognized (amount and character), Basis in Downton stock received? and Holding period in Downton stock received.
- What are the following tax consequences of the property transfers outlined above for Downton Corporation? What is Downtown Corporations gain/loss recognized, basis in land received, basis in inventory received, holding period in land received, and holding period in inventory received?
Related Book For
Concepts in Federal Taxation
ISBN: 9780324379556
19th Edition
Authors: Kevin E. Murphy, Mark Higgins, Tonya K. Flesher
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