Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $305,000 in return for 50 percent ofthe corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted taxbases in return for 50 percent of the corporation's stock: (Leave no answer blank. Enter zero if applicable. Negativeamount should be indicated by a minus sign.)Adjusted TaxFMVBasis$ 114,375266,875$ 381,250$ 30,500122,000$ 152,500BuildingLandTotalTo equalize the exchange, Wizard Corporation paid Hermione $76,250 in addition to her stock.Assume Hermione's adjusted tax basis in the land was $305,000.f. What amount of gain or loss does Hermione realize on the formation of the corporation? What amount, if any, does she recognize?Gain or loss realizedGain or loss recognized$22,875

Gain recognized=Cash Paid×FMV BuildingTotal FMV

Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $305,000 in return for 50 percent of the corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted tax bases in return for 50 percent of the corporation's stock: (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) Adjusted Tax Basis FMV $ 114,375 266,875 $ 30,500 122,000 $ 152,500 Building Land $ 381,250 Total To equalize the exchange, Wizard Corporation paid Hermione $76,250 in addition to her stock. Assume Hermione's adjusted tax basis in the land was $305,000. f. What amount of gain or loss does Hermione realize on the formation of the corporation? What amount, if any, does she recognize? Gain or loss realized Gain or loss recognized 22,875

Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $305,000 in return for 50 percent of the corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted tax bases in return for 50 percent of the corporation's stock: (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) Adjusted Tax Basis FMV $ 114,375 266,875 $ 30,500 122,000 $ 152,500 Building Land $ 381,250 Total To equalize the exchange, Wizard Corporation paid Hermione $76,250 in addition to her stock. Assume Hermione's adjusted tax basis in the land was $305,000. f. What amount of gain or loss does Hermione realize on the formation of the corporation? What amount, if any, does she recognize? Gain or loss realized Gain or loss recognized 22,875

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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15.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 tax bases in return for 50 percent of the corporation’s stock: (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) FMV Adjusted Tax Basis Building $ 75,000 $ 20,000 Land 175,000 80,000 Total $ 250,000 $ 100,000 To equalize the exchange, Wizard Corporation paid Hermione $50,000 in addition to her stock. What amount of gain or loss does Ron recognize on the formation of the corporation? Gain or loss recognized
What are the tax consequences to Paul?
Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $305,000 in return for 50 percent of the corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted tax bases in return for 50 percent of the corporation's stock: (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) Adjusted Tax FMV Basis $ 114,375 266,875 $ 381,250 $ 30,500 122,000 $ 152,500 Building Land Total To equalize the exchange, Wizard Corporation paid Hermione $76,250 in addition to her stock. Assume Hermione's adjusted tax basis in the land was $381,250. i. What adjusted tax basis does Wizard Corporation take in the land and building received from Hermione? Land Building Adjusted tax basis
Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $305,000 in return for 50 percent of the corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted tax bases in return for 50 percent of the corporation's stock: (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) Adjusted Tax FMV Basis Building $ 114,375 266,875 $ 381,250 $30,500 Land 122,000 $ 152,500 Total To equalize the exchange, Wizard Corporation paid Hermione $76,250 in addition to her stock. Assume Hermione's adjusted tax basis in the land was $305,000. g. What adjusted tax basis does Wizard Corporation take in the land and building received from Hermione? Land Building Adjusted tax basis $ 53,375
18. 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 tax bases in return for 50 percent of the corporation’s stock: (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) FMV Adjusted Tax Basis Building $ 75,000 $ 20,000 Land 175,000 80,000 Total $ 250,000 $ 100,000 To equalize the exchange, Wizard Corporation paid Hermione $50,000 in addition to her stock. What is Hermione’s tax basis in the stock she receives in return for her contribution of property to the corporation?
19. 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 tax bases in return for 50 percent of the corporation’s stock: (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) FMV Adjusted Tax Basis Building $ 75,000 $ 20,000 Land 175,000 80,000 Total $ 250,000 $ 100,000 To equalize the exchange, Wizard Corporation paid Hermione $50,000 in addition to her stock. What adjusted tax basis does Wizard Corporation take in the land and building received from Hermione? Adjusted tax basis land and building?
None
5. Annie and Alice invested $50,000 and $25,000 respec- tively in a business enterprise. During the first year of operation, the business had taxable income of $12,000. a. If the business is organized as a partnership, with profits and losses shared based on the proportion of each part- ner's original investment, how much of the income will each claim on her personal tax return? b. After the initial year of success, a weakened economy caused the business to falter. Following four successive years of losses, the assets of the business were $30,000 and the debts were $50,000. The two owners decided to liquidate the business. What are the financial conse- quences of the dissolution of the business to each owner?
Tim contributes equipment with a tax basis of $150,000 and a FMV of $170,000 in exchange for 100% of the stock of Blue corporation and $30,000 cash. As a result, Tim will recognize a gain of $30,000 for the cash received. True False
Last year, lana purchased a $100,000 account receivable for $90,000. During the current year, Lucy collected $97,000 on the account. What are the tax consequences to Lucy associated with the collection of the account receivable? No subsequent collections are expected. a.$7,000 gain b.$3,000 loss c.$13,000 loss d.$2,000 gain
Lo Lo and Lawrence Lancaster file married Joint Calculate tax liability before tax credits based on the following information: Salary: LoLo $90,000 Lance $70,000 Interest on City of Los Angeles bonds $10,000 Treasury bill interest $20,000 Gift from LoLo's sister Lia $20,000 Dividends $10,000 Lance inherited $40,000 from his great uncle Luther. Long term capital gain $50,000 Sole proprietorship income $100,000 LoLo broke her arm in a fall at Sears and received a legal settlement of $100,000 Lance found a rare coin worth $10,000 on the beach Unemployment compensation $20,000 LOLo's sister Lara repaid a $20,000 loan from 2012 Lance won $5,000 in a football pool at work. LoLo won a bowling tournament and won $5,000 Contribution to Health Savings Account $1,000 Mortgage interest paid $30,000. The $4,000,000 mortgage was signed in 2016 Contribution to Individual Retirement Account. $1,000 Self Employment tax $ 2,000 Real estate tax $10,000 Medical Expenses $30,000 Penalty for early…