Question

Susan Kim contributed a piece of land to Sycamore Company for a 15 percent stake in...

Susan Kim contributed a piece of land to Sycamore Company for a 15 percent stake in the firm 10 years ago. Her tax basis in the land was $200,000. When the land was transferred to Sycamore, its fair market value was $350,000.

How much gain do Susan and Sycamore Company recognize from this transaction? About two years later, Sycamore sold the land to an unrelated person for $490,000. How much gain should Sycamore Company recognize on this transaction? If Sycamore is an LLC, how much gain should Susan recognize? If Sycamore is an S corporation, how much gain should she recognize?

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Answer #1

How much gain do Susan and Sycamore Company recognize from this transaction?

Susan recognizes a gain of = 350,000 - 200,000 = 150,000

Sycamore company recognizes no gain or no loss.

About two years later, Sycamore sold the land to an unrelated person for $490,000. How much gain should Sycamore Company recognize on this transaction?

Gain to be recognized = 490,000 -200,000= 290,000

If Sycamore is an LLC, how much gain should Susan recognize?

Susan recognizes a gain of = 350,000 - 200,000 = 150,000

If Sycamore is an S corporation, how much gain should she recognize?

No gain or loss to be recognized.

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