Question

Karen, in forming a new corporation, transfers land to the corporation in exchange for 100 percent of the stock of the corporation. Karen's basis in the land is $492,800, and the corporation assumes a liability on the property in the amount of $542,080. The stock received by Karen has a fair market value of $985,600.

If an amount is zero, enter "0".

a. What is the amount of gain or loss that must be recognized by Karen on this transfer?

b. What is the amount of Karen's basis in the corporation's stock?

c. What is the amount of the corporation's basis in the land?

Answer 1

Solution :-

a ) :-

Measure of Gain or misfortune perceived by karen's on this exchange is $ "0" .

note : -

On the off chance that Share holders moves Any property in return of stock (exclusively), that exchange qualified as tax exempt exchange. Generally that is assessable . In current circumstance move just in return of stock , it qualified as tax exempt exchange .

b ) :-

Measure of karen's premise in the enterprise stock $ " 0 " .

Functions: -

Basis of land exchanged = $492,800

Liabilities exchanged = $542,080

Basis on the Stock = $492,800 - $542,080

= ( $49,280 )

Basis on the Stock =  ( $49,280 )

Karen Adjusted Basis of stock can not underneath "zero"

c ) :-

Corporation’s basis in the land = $492,800 - $0

= $492,800

Corporation’s basis in the land = $492,800