Mr. and Mrs. Meredith own a sole proprietorship consisting of business assets with a $649,000 aggregated adjusted tax basis. According to an independent appraisal, the business is worth $2 million. The Merediths are planning to transfer the entire business to Molleri Inc. in exchange for 20,000 shares of Molleri stock. How much gain will the Merediths recognize on the exchange of business assets for stock and what basis will they take in the stock if:

a. Molleri has 23,000 shares of outstanding stock immediately after the exchange?

b. Molleri has 500,000 shares of outstanding stock immediately after the exchange?

Answer rating: 100% (QA)

a The Merediths will own 87 of Molleris outstanding stock 20000 s... View the full answer