Question

Please answer Fully and show work

25. Harrison and Julia form Iris Corporation. Harrison transfers property (basis of $400,000

and fair market value of $300,000) while Julia transfers land of $150,000 and fan

market value of $280,000) and $20,000 of cash. Each receives 50% of Ins s stock. As a

result of these transfers:

aHarrison has a recognized loss of $l00,000, and Julia has a recognize d gain of

$130,000.

B Neither Harrison nor Julia has any recognized gain or loss.

C Harrison has no recognized loss, but Julia has a recognized gain of $l30,0 00

D Iris Corporation will have a basis in the land of $280,000.

E None of the above.

26. Phillip transfers land worth $300,000, basis of $200,000, to a newly fonded corporation,

Peony Corporation, for all of Peony's stock, worth $250,000, and a 10-year note. The

note was executed by Peony and made payable to Phillip in the amount of $50,000. As a

result of the transfer:

a Phillip does not recognize gain.

B Phillip recognizes gain of $50,000.

C Peony Corporation has a basis of $200,000 in the land.

d. Peony Corporation has a basis of $300,000 in the land.

e. None of the above.

Answer 1

Part 25:

Option B

B Neither Harrison nor Julia has any recognized gain or loss.

Harrison transfers property to Iris Corporation solely in exchange of stocks and he is in “control” immediately after exchange. Thus, according to section 351, no gain or loss should be recognized for this transfer.

Julia transfers property to Iris Corporation solely in exchange of stocks and she is in “control” immediately after exchange. Thus, according to section 351, no gain or loss should be recognized for this transfer.

Part 26:

Option D

d. Peony Corporation has a basis of $300,000 in the land.

As for the transfer of land, Peony corporation paid stock worth $250000+notes payable $50000 = $300000