Jack and Diane transfer appreciated song lyrics to Mellencamp Inc. The lyrics are property for purposes of 351. Jack and Diane have a basis in the song lyrics of $50,000 each (aggregate $100,000). The song lyrics have a fair market value of $500,000 each ($1,000,000 aggregate) In Exchange for the lyrics.

Mellencamp Inc. Issues 10,000 shares (each) of voting common stock to both Jack and Diane. The common stock has a fair market value of $40 per share ( $400,000 each $800,000 aggregate), Jack and Diane also receive on share each of non-voting preferred stock with a fair market value of $50,000 ($100,000 total). Additionally, they receive a corporate notes payable in the amount of $50,000 each ($100,000 aggregate).

The non-voting preferred stock issued at the time of the exchange allows Jack and Diane to force Mellencamp to purchase the stock in 10 years for the fair market value at such time. The note is payable in 2 years has state reasonable interest.

Jack and Diane's basis in the common stock received is: ?

Jackand Diane's basis in the preferred stock is equal to: ?

Mellencamp's basis in the music lyrcisat the time of the transfer is equal to: a

Jack and Diane;s basis in the note received is equal to $50,000 each? T/F?

If Mellencamp Inc. Sells song lyrics to John Cougarat the end of year 3 for the fair market value, Mellencamp Inc. will have a gain of: ?

 

 

Answer rating: 100% (QA)

Answer Lets break down the information provided and calculate the basis for each item Basis in Commo... View the full answer