Don and Marie formed Paper Lilies Corporation on January 2.Don contributed cash of $400,000 in return for 50 percent of the corporation's stock.Marie contributed a building and land with the following fair market values and tax bases in return for 50 percent of the corporation's stock.
$$\begin{array} { l r r r r }
& \text { FMV } & \text { Tax Basis } \
\text { Buildirg } & 180,000 & 120,000 \
\text { Land } & \underline{270,000} & \underline{80,000} \
\text { Total } &\underline{ \$ 450,000} & \underline{\$ 200,000}
\end{array}$$ To equalize the exchange, Paper Lilies Corporation paid Marie $50,000 in addition to her stock.
a.What amount of gain or loss does Marie realize on the formation of the corporation?
b.What amount of gain or loss, if any, does she recognize?
c.What is Marie's tax basis in the stock she receives in return for her contribution of property to the corporation?
d.What tax basis does Paper Lilies Corporation take in the land and building received from Marie?

Question

Don and Marie formed Paper Lilies Corporation on January 2.Don contributed cash of $400,000 in return for 50 percent of the corporation's stock.Marie contributed a building and land with the following fair market values and tax bases in return for 50 percent of the corporation's stock.
 $$\begin{array} { l r r r r } 
& \text { FMV } & \text { Tax Basis } \
\text { Buildirg } &  180,000 & 120,000 \
\text { Land } & \underline{270,000} &  \underline{80,000} \
\text { Total } &\underline{ \$ 450,000} & \underline{\$ 200,000}
\end{array}$$  To equalize the exchange, Paper Lilies Corporation paid Marie $50,000 in addition to her stock.
a.What amount of gain or loss does Marie realize on the formation of the corporation?
b.What amount of gain or loss, if any, does she recognize?
c.What is Marie's tax basis in the stock she receives in return for her contribution of property to the corporation?
d.What tax basis does Paper Lilies Corporation take in the land and building received from Marie?

Quizplus · Accepted Answer

The Answer of Don and Marie formed Paper Lilies Corporation on January 2.Don contributed cash of $400,000 in return for 50 percent of the corporation's stock.Marie contributed a building and land with the following fair market values and tax bases in return for 50 percent of the corporation's stock.
 $$\begin{array} { l r r r r } 
& \text { FMV } & \text { Tax Basis } \
\text { Buildirg } &  180,000 & 120,000 \
\text { Land } & \underline{270,000} &  \underline{80,000} \
\text { Total } &\underline{ \$ 450,000} & \underline{\$ 200,000}
\end{array}$$  To equalize the exchange, Paper Lilies Corporation paid Marie $50,000 in addition to her stock.
a.What amount of gain or loss does Marie realize on the formation of the corporation?
b.What amount of gain or loss, if any, does she recognize?
c.What is Marie's tax basis in the stock she receives in return for her contribution of property to the corporation?
d.What tax basis does Paper Lilies Corporation take in the land and building received from Marie?

Don and Marie Formed Paper Lilies Corporation on January 2