Question

Nina, Gino, and Raina form the Loffredo Corporation. Nina transfers $120,000 cash and inventory worth $130,000 with a basis of $90,000. Gino transfers land and building worth $250,000 with a basis of $120,000. Raina transfers legal and accounting services to incorporate worth $50,000. Loffredo issues its 500 shares as follows: 250 shares to Nina, 200 shares to Gino, and 50 shares to Raina. In addition, Gino receives $50,000 cash from Loffredo. How much gain (if any) do Nina and Gino recognize?

		a. Nina recognizes no gain and Gino recognizes $50,000 gain.
		b. Nina recognizes $40,000 gain and Gino recognizes $50,000 gain.
		c. Nina recognizes no gain and Gino recognizes $130,000 gain.
		d. Nina recognizes $40,000 gain and Gino recognizes $130,000 gain.
		e. None of the above.

Nina, Gino, and Raina form Loffredo Corporation. Nina transfers $120,000 cash and inventory worth $130,000 with a basis of $90,000. Gino transfers land and building worth $250,000 with a basis of $120,000. Raina transfers legal and accounting services to incorporate worth $50,000. Loffredo issues its 500 shares as follows: 250 shares to Nina, 200 shares to Gino, and 50 shares to Raina. In addition, Gino receives $50,000 cash from Loffredo. What is Gino’s basis in the Loffredo stock?

		a. $170,000.
		b. $120,000.
		c. Zero.
		d. None of the above.

1. Nina, Gino, and Raina form Loffredo Corporation. Nina transfers $120,000 cash and inventory worth $130,000 with a basis of $90,000. Gino transfers land and building worth $250,000 with a basis of $120,000. Raina transfers legal and accounting services to incorporate worth $50,000. Loffredo issues its 500 shares as follows: 250 shares to Nina, 200 shares to Gino, and 50 shares to Raina. In addition, Gino receives $50,000 cash from Loffredo. What is Raina’s basis in the Loffredo stock?

   		a. Zero.
   		b. $50,000.
   		c. $100,000.
   		d. None of the above.

Answer 1

1) Answer is d part Nina has $40000 gain and Gino $130000 gain

Calculation

Nina's gain

Woth/sale price = 130000

Less cost/basis= 90000

Gain 40000

Cash remains same.

GINO'S GAIN

Sale /worth = 250000

Less BASIS = 120000

GAIN = 130000

2) Answer is b 120000 ( if assumed that 50000 cash received is a profit and cost recovery)

Answer is none of the above (in any other case )

3) Answer is b $50000 as the service provided by her was of worth $50000

It is not considered zero as the service provided is all together different and she is entitled to receive $50000 only because she provided services