FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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- Ramon incorporated his sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation’s stock. The property transferred to the corporation had the following fair market values and adjusted tax bases: FMV Adjusted Tax Basis Inventory $ 11,500 $ 4,800 Building 52,750 36,500 Land 122,000 60,000 Total $ 186,250 $ 101,300 The fair market value of the corporation’s stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Ramon. (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) a. What amount of gain or loss does Ramon realize on the transfer of the property to his corporation? b. What amount of gain or loss does Ramon recognize on the transfer of the property to his corporation?arrow_forwardKevan, Jerry, and Dave formed Albee LLC. Jerry and Dave each contributed $245,000 in cash. Kevan contributed the following assets: Basis Fair Market Value Kevan: Cash $15,000 $15,000 Land* 120,000 440,000 Totals $135,000 $455,000 *Nonrecourse debt secured by the land equals $210,000 Each member received a 33.33 percent capital and profits interest in the LLC. (Leave no answer blank. Enter zero if applicable. Do not round intermediate calculations.) f. If the lender holding the nonrecourse debt secured by Kevan’s land required Kevan to guarantee 33.33 percent of the debt and Jerry to guarantee the remaining 66.67 percent of the debt when Albee LLC was formed, how much gain or loss will Kevan recognize? Gain or loss recognizedarrow_forwardZhang incorporated her sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation's stock. The property transferred to the corporation had the following fair market values and adjusted tax bases: Adjusted Tax FMV Basis $ 56,000 420,000 644,000 $ 1,120,000 $ 28,000 280,000 840,000 Inventory Building Land $ 1,148,000 Total The corporation also assumed a mortgage of $100,000 attached to the building and land. The fair market value of the corporation's stock received in the exchange was $1,020,000. The transaction met the requirements to be tax-deferred under §351. (Negative amount should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.) Assume the corporation assumed a mortgage of $1,220,000 attached to the building and land. Assume the fair market value of the building is now $700,000 and the fair market value of the land is $1,484,000. The fair market value of the stock remains…arrow_forward
- Pan is the owner of an existing single proprietorship with net assets of P50,000. They agreed to record the assets and liabilities of Pan's business at book value. The book value of Pan's business liability is P60,000. Gian and Zet will contribute equally in cash 60% of the total capitalization based on the capital contribution of Pan. The capital contribution of Gian should bearrow_forwardKevan, Jerry, and Dave formed Albee LLC. Jerry and Dave each contributed $245,000 in cash. Kevan contributed the following assets: Basis Fair Market Value Kevan: Cash $15,000 $15,000 Land* 120,000 440,000 Totals $135,000 $455,000 *Nonrecourse debt secured by the land equals $210,000 Each member received a 33.33 percent capital and profits interest in the LLC. (Leave no answer blank. Enter zero if applicable. Do not round intermediate calculations.) b. What is Kevan’s tax basis in his LLC interest? Jerry Dave Kevan Gain or loss recognizedarrow_forwardMaría and Bob form Robin Corporation. María transfers property worth $420,000 with a basis of $150,000 for 70 shares in Robin Corporation. Bob receives 30 shares for property worth $165,000 with a basis of $30,000 and legal services worth $15,000 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? María recognizes no gain or loss Feedback of $ Bob recognizes ordinary income of $ Check My Work Section 351 is mandatory if a transaction satisfies the provision's requirements. The three requirements for nonrecognition of gain or loss under § 351 are that (1) property is transferred (2) in exchange for stock and (3) the property transferors are in control of the corporation after the exchange. b. What basis do María and Bob have in the Robin Corporation stock? María has a basis of $ Feedback Check My Work Incorrect , and Bob has a basis of $ 420,000 X in the stock. c. What is Robin…arrow_forward
- 3. Ramon incorporated his sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation’s stock. The property transferred to the corporation had the following fair market values and adjusted tax bases: FMV Adjusted Tax Basis Inventory $ 10,000 $ 4,000 Building 50,000 30,000 Land 100,000 50,000 Total $ 160,000 $ 84,000 The fair market value of the corporation’s stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Ramon. (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) What is Ramon’s basis in the stock he receives in his corporation?arrow_forwardDetermine the basis of stock in the hands of the shareholder, the basis to the corporation of the contributed property, and the gain, if any, to the shareholder in each of the follow independent cases. In all cases, assume that the 80% test is met. a. Pierre contributes a vehicle with a FMV of $ 6,000.00 and basis of $ 8,000.00. b. Marcus contributes land with a FMV of $ 500,000.00, basis of $ 300,000.00, and debt of $ 250,000.00. c. Same as b. Except Marcus also receives cash of $ 25,000.00. d. Patricia contributes an apartment building with a FMV of $ 200,000, basis of $ 50,000.00, and debt of $ 125,000.00arrow_forwardHelen owns 30% of a flow-through entity. The capital gain comes from the sale of a piece of equipment that Helen contributed to the entity. At the time of contribution, the piece of equipment had a basis of $45,000 and a fair market value of $50,000. The entity reports the following amounts before any payments to the owners: O/S Item Amount Sales Revenue 30,000 Dividends received 10,000 Tax-exempt interest income 15,000 Capital gain 5,000 Charitable contributions 1,000 Cost of Goods Sold 10,000 General Business Expenses 3,000 a) In the O/S column above, write ‘O’ for any ordinary business items and write ‘S’ for any separately stated items. b) Assume that the entity is an S-Corp, and that Helen is also an employee of the…arrow_forward
- Global Corporation distributed property with an $543,000 fair market value and a $298,650 adjusted basis to one of its shareholders. The property was subject to a $164,258 mortgage, which the shareholder assumed. Global has ample E & P to cover any distribution made during the year. What is the amount of the shareholder's dividend income on the distribution? 378,742 What is the shareholder's basis in the property received?arrow_forwardRamon incorporated his sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation's stock. The property transferred to the corporation had the following fair market values and adjusted tax bases: Inventory Building Land Total FMV $ 10,000 50,000 100,000 $ 160,000 Adjusted Tax Basis $ 4,000 30,000 50,000 $ 84,000 The fair market value of the corporation's stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Ramon. Note: Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign. Required: a. What amount of gain loss does Ramon realize on the transfer of the property to his corporation? b. What amount of gain or loss does Ramon recognize on the transfer of the property to his corporation? c. What is Ramon's basis in the stock received in the new corporation? Required A Complete this question by entering your answers in…arrow_forwardRamon incorporated his sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation's stock. The property transferred to the corporation had the following fair market values and adjusted tax bases: Adjusted Tax Basis FMV $ 21,500 54,750 139,000 $ 215,250 $ 9,200 47,000 Inventory Building Land 69,000 $ 125,200 Total The fair market value of the corporation's stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Ramon. (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) c. What is Ramon's basis in the stock he receives in his corporation? Tax basisarrow_forward
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