Jeffrey Wingate and Jill Gifford have agreed to form FreshNow, Inc., an organic wholesale food distributor. Mr.
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- Jeffrey Wingate and Jill Gifford have agreed to form FreshNow, Inc., an organic wholesale food distributor. Mr. Wingate transfers $900,000 in cash and services valued at $100,000 in exchange for 10% of FreshNow, Inc. common stock valued at $1 million.
Ms. Gifford will transfer the following assets and liabilities in exchange for 40% of the common stock of FreshNow, Inc., valued at $4 million
Basis | Fair Market Value | |
Assets | ||
Warehouse | $5 million | $6 million |
Land | 2 million | 3 million |
Equipment | 0 million | 1 million |
Total Assets | $7 million | $10 million |
Liabilities | $6 million |
Also, Whole Foods, Inc. has agreed to contribute $8 million in cash in exchange for 50% of the common stock valued at $5 million and a note of $3 million issued by FreshNow, Inc.
The transaction qualifies as an exchange governed by section 351(a).
- State the total basis Jeffrey Wingate obtains in all the FreshNow, Inc. stock he receives.
- State the total basis Ms. Gifford obtains in all the FreshNow, Inc. stock she receives.
- State the total basis that FreshNow, Inc. obtains in the assets received from Ms. Gifford.
- State the taxable income that Whole Foods, Inc. recognizes for its receipt of the note issued by FreshNow, Inc.
Related Book For
Financial and Managerial Accounting
ISBN: 978-0538480895
11th Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren
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