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CHAPTER 8 ATTEMPT 1 (1) Ramon incorporated his sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporations stock. The property transferred to the corporation had the following fair market values and tax-adjusted bases: FMV Tax- Adjusted Basis Inventory $ 24,000 $ 12,400 Building 54,250 42,250 Land 181,000 58,500 Total $ 259,250 $ 113,150 The fair market value of the corporations stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Ramon. (Leave no cells blank - be certain to enter "0" wherever required. Loss amounts should be indicated by a minus sign. Omit the "$" sign in your response.) a. What amount of gain or loss does Ramon realize on the transfer of the property to his corporation? Gain or loss realized $ b. What amount of gain or loss does Ramon recognize on the transfer of the property to his corporation? Gain or loss recognized $ c. What is Ramons basis in the stock he receives in his corporation? Tax basis $ Explanation: a. Ramon realizes a net gain of $146,100 on this transfer, computed as follows: Fair market value of stock received $ 259,250 Adjusted tax basis of the property transferred 113,150 Gain realized $ 146,100 b. Ramon does not recognize any gain or loss on the transfer because the requirements of 351 are met and no boot is received in the exchange. c. $113,150. Ramons tax basis in the stock received is a substituted basis of the assets transferred. (2) This year, Jack O. Lantern incurred a $69,750 loss on the worthlessness of his stock in the Creepy Corporation (CC). The stock, which Jack purchased in 2005, met all of the 1244 stock requirements at the time of issue. In December of this year, Jacks wife, Jill, also incurred a $82,500 loss on the sale of Eerie Corporation (EC) stock that she purchased in July 2005 and which also satisfied all of the 1244 stock requirements at the time of issue. Both corporations which also satisfied all of the 1244 stock requirements at the time of issue.... View Full Document

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