AC553_W4_Solution14_52

AC553_W4_Solution14_52 - What is the basis to the...

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1 Problem 14-52 Solution Section 351 Transfers Sam Rogers forms a corporation. Sam transfers to the corporation property having a basis to him of $15,000 and a fair market value of $27,000 for 900 shares of the $10 par stock of the corporation. A year later, Bill Morrison, who is not related to Sam, transfers property having a basis to him of $1,000 and a fair market value of $3,000 for 100 shares of the corporate stock. The corporation issued no other stock. a. How much gain does Sam recognize on his exchange? What is the basis to Sam of his 900 shares? b. How much gain does Bill recognize on his exchange? What is the basis to Bill of his 100 shares? c. What gain or loss is recognized by the corporation when it issues its shares to Sam? What is the basis to the corporation of the property it received from Sam? d. What is the gain or loss recognized by the corporation when it issues its shares to Bill?
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Unformatted text preview: What is the basis to the corporation of the property it received from Bill? Solution: a. No gain is recognized since the transaction qualifies under Code Sec. 351. Sam's basis in the stock is $15,000, the same as his basis in the property transferred to the corporation. b. Bill recognizes a $2,000 gain ($3,000 fair market value 1 $1,000 basis). The transfer does not qualify under Code Sec. 351 because Bill does not end up with 80 percent control after the transaction. Bill's basis in the stock is $3,000. c. The corporation recognizes no gain or loss on the issuance of stock. The corporation takes over the basis of Sam's property plus any gain recognized by Sam on the transfer$15,000 ($15,000 + no gain recognized). d. The corporation recognizes no gain or loss on the issuance of stock. The corporation's basis in the property is $3,000....
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This note was uploaded on 02/21/2012 for the course ACCOUNTING 553 taught by Professor James during the Spring '12 term at DeVry Phoenix.

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