Tax Research Homework Chapters 2

Tax Research Homework Chapters 2 - Tax Research Homework...

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C2:31 a. What is the amount of Ed’s recognized gain or loss? Ed’s recognized gain is $20,000($35,000 FMV of the purchase – $15,000 property exchange (35 shares)). b. What is Ed’s basis in his Jet shares? When does his holding period begin? Under the rules of property requirements for Sec. 351, a shareholder’s basis in the stock received is the stock’s FMV, which would make Ed’s basis in his Jet shares be $35,000. Sec. 351 requires the transferors to be in control immediately, it would make Ed’s holding period begins the very next day after the exchange. c. What is the amount of Fran’s recognized gain or loss? Fran will recognize a loss of $10,000($45,000 adjusted basis - $35,000 FMV). d. What is Fran’s basis in her Jet shares? When does her holding period begin? Fran’s basis in her Jet shares is based on the FMV in the amount of $35,000. Her holding period will begin the very next day after the exchange. e. How much income, if any, does George recognize? George will recognize as income $30,000 under Sec. 351 it states that when a person receives stock as compensation for services he must recognize the stock’s FMV as ordinary income for tax purposes. f. What is George’s basis in his Jet shares? When does his holding period begin? George’s basis in his Jet shares will be $30,000 and his holding period will begin the very
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Tax Research Homework Chapters 2 - Tax Research Homework...

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