Problem 39 and Comprehensive problem 83

Problem 39 and Comprehensive problem 83 - 1 Problem 39 and...

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Problem 39 and Comprehensive problem 83 Liliana Zamfiroiu ACC 547 June 20, 2011 Steve Meyer 1
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Problem 39 (Chapter 19) a. What amount of gain or loss does Zhang realize on the transfer of the property to her corporation? According to our readings, “realization generally occurs when a transaction takes place (that is, there has been an exchange of property rights between two persons)” (p. 19-3). In Zhang situation, the transaction is between she and the corporation. FMV $300,000 Mortgage assumed by corporation $100,000 Amount Realized $400,000 Adjusted tax basis of the property transferred $410,000 Gain/(Loss) $(10,000) $400,000-$410,000=-$10,000(Zhang realize a loss on the transfer of the property to her corporation) b. What amount of gain or loss does Zhang recognize on the transfer of the property to her corporation? According to our readings “Gain or loss not recognized when realized falls into one of two categories: (1) the gain or loss is excluded from gross income (that is, the gain or loss will never be recognized) or (2) the gain or loss is deferred from inclusion in (or deduction from) gross income (that is, recognition of the gain or loss is postponed to a future period). Section 351 applies to transactions in which one or more persons transfer property to a corporation in return for stock, and immediately after the transfer, these same persons control the corporation to which they transferred the property. If 2
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transaction meets these requirements, the transferors of property do not recognize gain or loss realized on the transfer of the property to corporation. In our situation, Zhang meets the section 351 requirements, there is no loss or gain recognized on the transfer of the property to her corporation. c) What is Zhang’s tax basis in the stock she receives in the exchange? FMV of Corps stock received $300,000 Loss Deferred $10,000 Zhang’s Tax-Basis $310,000 According to our readings, “Gain or loss deferred in the transfer of property to a corporation in return for stock is reflected in the shareholder’s tax basis in the stock received in exchange for the property transferred.” In this case, loss deferred increases the shareholder’s tax basis in the stock to an amount equal to the stock’s fair market value plus the loss deferred. d. What is the corporation’s tax-adjusted basis in each of the assets received in the exchange? Assume the corporation assumed a mortgage of $500,000 attached to the building and land. Tax-adjusted basis=carryover+/-gain (loss) on the exchange = $410,000-$90,000=$320,000 3
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FMV Tax-Adjusted Basis Inventory $20,000 $10,000 Building 250,000 100,000 Land 530,000 300,000 Total $400,000 410,000 e) How much, if any, gain or loss does Zhang recognize on the exchange assuming the revised facts? FMV of Corps stock received
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Problem 39 and Comprehensive problem 83 - 1 Problem 39 and...

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