Tom and Ann meet up with old college professor, Randy. They decide to form a software company.
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- Tom and Ann meet up with old college professor, Randy. They decide to form a software company. Tom has a building worth 400,000 (100,000 basis). Ann has a warehouse full of computers, printers, copiers, etc. worth 200,000 (200,000 basis). Randy has some experience with startup and will contribute his services for a few months, and it is agreed that these services are valued at $50,000. For legal liability protection, they decide to incorporate the business into a company called TAR Corp (“TAR”). T gets 400,000 shares and A will each get 200,000 shares and R will get 50,000 shares.
- a) What are the tax consequences to each of the parties, Tom, Ann, and Randy, upon receipt of the stock in exchange for their respective contributions? How much gain or income does Tom have; does Ann have; does Randy have?
- b) What will be Tom’s basis in the TAR stock? What will Ann’s be? What will Randy’s be?
- c) What basis will TAR have in the building? In the computers, printers, etc.?
Related Book For
Auditing A Practical Approach with Data Analytics
ISBN: 978-1119401742
1st edition
Authors: Raymond N. Johnson, Laura Davis Wiley, Robyn Moroney, Fiona Campbell, Jane Hamilton
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