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a.What are the tax consequences to Allie and to Broadbill Corporation?
35. Rafael transfers the following assets to Crane Corporation in exchange for all of its stock. (Assume that neither Rafael nor Crane plans to make any special tax elections at the time of incorporation.)AssetsRafael’s Adjusted BasisFair Market ValueInventory$60,000$100,000Equipment150,000105,000Shelving80,00065,000a.What is Rafael’s recognized gain or loss?Realized Loss = AB of Rafael – FMV of Assets for Rafael ($60,000 + $150,000 + $80,000) – ($100,000 + $105,000 + $65,000) = $20,000 Realized LossRecognized Loss = $0b.What is Rafael’s basis in the stock?Rafael’s Basis in Stock = AB of Rafael in Assets $60,000 + $150,000 + $80,000 = $290,000 = Rafael’s Basis in Stock c.What is Crane’s basis in the inventory, equipment, and shelving?Crane’s Basis in Inventory = $60,000Crane’s Basis in Equipment = $135,000Crane’s Basis in Shelving = $75,000d.If Rafael has no intentions of selling his Crane stock for at least 15 years, what action would you recommend that Rafael and Crane Corporation consider? How does this change the previous answers?Crane is to take a carryover basis in the assets received. Crane’s basis is $60,000 for inventory, $150,000 for equipment and $80,000 for shelving 36. Alice and Jane form Osprey Corporation. Alice transfers property, basis of $25,000 and value of $200,000, for 50 shares in Osprey Corporation. Jane transfers property, basis of $50,000 and value of $165,000, and agrees to serve as manager of Osprey for one year; in return, Jane receives 50 shares in Osprey. The value of Jane’s services to Osprey is $35,000.