Fill in the blanks using the Answer key below.

A, B, C, and D transfer property to X corporation in exchange for 100% of its stock.Each receives 25% of its shares as a result.A transfers land with a basis of $25,000 and a fair value of $20,000.B transfers equipment with a basis of $5,000 and a fair value of $20,000 (prior depreciation of $15,000 was taken).C transfers $20,000 in cash.D transfers a $20,000 (face value and amount) installment note that he had received in exchange for a capital asset in which D had a $2,000 basis.

1. A realizes a -blank- and recognizes a-blank-.
2. B realizes a-blank- and recognizesB realizes a-blank-of it under Section 1245 due the prior depreciation.
3. The transfer of money by C -blank- the exchange from qualifying under Section 351(a) because money -blank- considered property for this purpose.
4. D realizes a-blank- gain -blank-recognize it.This hinges on whetherSection 453B(a) applies, noting it generally requires the recognition of any gain realized upon the disposition of an installment obligation.
5. If A sells his stock in X corporation for $20,000, then A will recognize either a $5,000 loss or a $0 loss depending on whether an election under Section -blank- is made.
6. X corporation assumes a-blank- basis in the land absent an election to instead assume a -blank-. X corporation also assumes a-blank- basis in the equipment and a -blank- basis in the installment obligation.

Answer Key

$5,000 loss

$0 loss

$5,000 gain

$15,000 gain

none

all

prevents

does not prevent

is

is not

$18,000

$0

and has to

but does not have to

351(a)

362(e)(2)(A)

358(a)

$20,000

$25,000

$5,000

$2,500

$2,000