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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Required information
[The following information applies to the questions displayed below.]
Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $200,000 in return for 50 percent of
the corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted bases
in return for 50 percent of the corporation's stock:
Building
Land
Total
FMV
$ 75,000
175,000
$250,000
To equalize the exchange, Wizard Corporation paid Hermione $50,000 in addition to her stock.
Adjusted basis
Assume Hermione's adjusted basis in the land was $250,000.
i. What adjusted basis does Wizard Corporation take in the land and building received from Hermione? (Leave no answer blank. Enter
zero if applicable. Negative amount should be indicated by a minus sign.)
Tax-
Adjusted
Basis
$ 20,000
80,000
$100,000
Land
$
Building
20,000](https://content.bartleby.com/qna-images/question/05ff31a9-709f-4a02-b6e2-7ded618c9867/34208289-4f28-4cd1-b08a-34784decbf3d/1vhdmec_thumbnail.jpeg)
Transcribed Image Text:!
Required information
[The following information applies to the questions displayed below.]
Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $200,000 in return for 50 percent of
the corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted bases
in return for 50 percent of the corporation's stock:
Building
Land
Total
FMV
$ 75,000
175,000
$250,000
To equalize the exchange, Wizard Corporation paid Hermione $50,000 in addition to her stock.
Adjusted basis
Assume Hermione's adjusted basis in the land was $250,000.
i. What adjusted basis does Wizard Corporation take in the land and building received from Hermione? (Leave no answer blank. Enter
zero if applicable. Negative amount should be indicated by a minus sign.)
Tax-
Adjusted
Basis
$ 20,000
80,000
$100,000
Land
$
Building
20,000
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- Tony Smith and Bill Jones buy property for $500,000. Tony and Bill organize a corporation when the property has a fair market value of $700,000. They transfer the property to the corporation for all its authorized capital stock, which has a par value of $700,000. What amount of gain is recognized by Tony? A. $0 B. $250,000 C. $500,000 D. $700,000arrow_forwardMunabhaiarrow_forwardRequired Information [The following information applies to the questions displayed below.] Julio and Milania are owners of Falcons Corporation, an S corporation. Each owns 50 percent of Falcons Corporation. In year 1, Julio and Milania each received distributions of $12,000 from Falcons Corporation. Sales revenue Cost of goods sold Falcons Corporation (an S Corporation) Income Statement December 31, Year 1 and Year 2 Salary to owners Julio and Milania Employee wages Depreciation expense Section 179 expense Interest income (related to business income) Municipal bond income Government fines Overall net income Distributions Ordinary Income Amount Year 1 $ 335,000 (42,000) (40,000) (30,000) (20,000) (30,000) 12,000 1,808 Allocated to Julio 0 $ 186,800 $ 24,000 a. What amount of ordinary income and separately stated items are allocated to them for year 1 based on the information above? Assume that Falcons Corporation has $240,000 of qualified property (unadjusted basis). Year 2 $ 465,000…arrow_forward
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