Three owners join together to form ABC, INC., which properly elects to be taxed as a C
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- Three owners join together to form ABC, INC., which properly elects to be taxed as a C corporation. Shareholder A contributes cash of $10,000 and a collection of jewelry display cases to be placed in the jewelry store operated by the C corporation. The jewelry display cases have a basis in A’s hands of $112,000, and a fair market value of $81,000. B contributes $10,000 in cash and jewelry inventory having a basis in B’s hands of $35,000 and a fair market value of $81,000. C contributes inventory having a basis in C’s hands of $120,000 and a fair market value of $96,000. Since each of the three of them has agreed to be equal shareholders, it was determined that it was fair to distribute $5,000 in cash to Shareholder C because her initial contribution had a fair market value of $5,000 more than the contribution of either A or B.
a. What gain or loss is recognized by ABC, Inc., as a result of the contribution transactions by its three initial shareholders?
- How much gain or loss is recognized by A as a result of her contribution?
- What is the balance in A’s capital account immediately following her contribution?
- How much gain or loss does B recognize as a result of his contribution?
- What is the balance in B’s capital account immediately following his contribution?
- How much gain or loss does C recognize as a result of her contribution?
- What is the Basis of C’s capital account immediately following the contribution?
Related Book For
Conceptual Physical Science
ISBN: 978-0134060491
6th edition
Authors: Paul G. Hewitt, John A. Suchocki, Leslie A. Hewitt
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