24. Dave formed Shull Company and transferred land ($100,000 fair market value; $40,000
adjusted basis) and equipment ($50,000 fair market value; $10,000 adjusted basis) in exchange
for 100 shares of stock. Shull Company assumes the $45,000 mortgage on the land as part of the
transfer. Dave’s tax consequences are:
Basis in 100 shares
25. Jenny Co. donated inventory with an adjusted basis of $50,000 and a $78,000 fair market
value to a qualified public charity, which will use the inventory for the care of the ill and needy.
It donates other inventory with an adjusted basis of $26,000 and a $40,000 fair market value to a
qualified public charity that will not use the inventory for the care of the needy, ill, or infants (the
donee is not an educational or research organization). What is Jenny Co.’s charitable deduction?
26. The amount of a cash dividend is independent of whether or not the shareholder is a
27. John Jergen’s stock basis is $3,000 and he has owned it for two years. If E&P is $4,000 and
John receives a distribution of $12,000, the result is a dividend of $4,000, a return of capital of
$3,000, and a long-term capital gain of $5,000.
28. A shareholder receives a tax-free preferred stock dividend on her common stock.
Subsequently, she sells both her common and preferred stock to her aunt. She will not have any
29. When a tax-free right is received, the shareholder may be able to allocate basis to it from his
stock, or it may simply have a zero basis.