Net Co, a US corporation, is planning to start operating in Argentina. Net Co has formed a
Question:
Net Co, a US corporation, is planning to start operating in Argentina. Net Co has formed a 100% owned subsidiary in Argentina, Arg Co. Net Co contributes a number of assets to Arg Co in exchange for all of Arg Co's stock. Arg Co will use the assets in an active trade/business. The assets contributed include the following:
- Accounts receivable with a basis of $20,000 and a fair market value of $65,000,
- Equipment that was purchased for $250,000 and depreciated over the years such that the current adjusted basis is $190,000. The fair market value of the equipment is $260,000,
- Inventory that cost $50,000 has a value of $80,000, and
- Non-depreciable equipment that was purchased for $110,000 and has a fair market value of $165,000.
What are the tax consequences for Net Co when it contributes these assets to Arg Co in exchange for Arg Co stock?
Taxes and Business Strategy A Planning Approach
ISBN: 9780132752671
5th edition
Authors: Myron Scholes, Mark Wolfson, Merle Erickson, Michelle Hanlon