All rights reserved maxixishere pdf collection becker

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Unformatted text preview: t; is correct. As a general rule, a shareholder who contributes property to a corporation in exchange for common stock will not recognize gain or loss if immediately after the transaction when the transferring shareholders (there can be more than one transferor) own at least 80% of the corporation and the shareholder does not receive any boot. In this case, Dole as the sole shareholder owns more than 80% but receives boot, cash of $40,000. Therefore, Dole will recognize gain to the lesser of cash received or realized gain as follows: Dole *Amount Realized **Adjusted basis Realized Gain Recognized gain = Lesser of realized gain ($65,000) or boot received ($40,000) $100,000 (35,000) $ 65,000 $ 40,000 *Amount Realized = Cash $40,000 + Common stock $60,000 ** Adjusted basis = the adjusted basis (NBV) of the building = $35,000 Choices "a", "b", and "d" are incorrect per the above explanation. CPA-04762 Type1 M/C A-D Corr Ans: A PM#88 R 3-01 69. CPA-04762 Released 2005 Page 27 Dove Corp. began operating a hardware store in the current year after constructing a building at a total cost of $100,000 on land previously acquired for $50,000. In the current year, the land had a fair market value of $60,000. Dove paid...
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