Question

Problem 18-31 (Algorithmic) (LO. 1, 3 )

Ann and Bob form Robin Corporation. Ann transfers property worth $315,000 (basis of $110,250) for 70 shares in Robin Corporation. Bob receives 30 shares for property worth $126,000 (basis of $25,200) and for legal services (worth $12,600) in organizing the corporation.

If there is no gain or loss, enter "0" for the amount.

a. What gain or income, if any, will the parties recognize on the transfer?

Ann recognizes of $______________. Bob recognizes of $______________.

b. What basis do Ann and Bob have in the Robin Corporation stock?

Ann has a basis of $_________, while Bob has a basis of $ in the stock.

c. What is Robin Corporation's basis in the property and services it received from Ann and Bob?

Robin Corporation has a basis of $____________ in the property Ann transferred and a basis of $____________ in the property Bob transferred.

Answer 1

(a)	Ann does not recognize gain.
	Bob recognizes a gain of $12,600, the value of services Bob rendered to the corporation. Bob does not recognize gain on the transfer of property to the corporation, because no boot received.
(b)	Ann has a basis of $1,10,250 in the stock of Robin Corporation.
	Bob has a basis of $37,800 in his stock in Robin Corporation. [$25,200 (in property transfer) + $12,600 (gain recognized)]
(c)	Robin Corporation has a basis of $1,10,250 in the property of Ann transferred and a basis of $25,200 in property Bob transferred. Robin corporation capitalizes $12,600 as organization cost.