Harry and Sally formed Empire Corporation on January 2.Harry contributed cash of $500,000 in return for 50 percent of the corporation's stock.Sally 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}
\begin{array} { c c }
&\text { FMV } & \text { Tax Basis } \
\text { Building }&180,000 & 150,000 \
\text { Land}&\underline{420,000} & \underline{500,000 }\
\text { Total}&\underline{\$ 600,000} & \underline{\$ 650,000 }\

\end{array}
\end{array}$$ To equalize the exchange, Empire Corporation paid Sally $100,000 in addition to her stock.
a.What amount of gain or loss does Sally realize on the formation of the corporation?
b.What amount of gain or loss, if any, does she recognize?
c.What is Sally's tax basis in the stock she receives in return for her contribution of property to the corporation?
d.What tax basis does Empire Corporation take in the land and building received from Sally?

Question

Harry and Sally formed Empire Corporation on January 2.Harry contributed cash of $500,000 in return for 50 percent of the corporation's stock.Sally 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}
\begin{array} { c c } 
&\text { FMV } & \text { Tax Basis } \
\text { Building }&180,000 & 150,000 \
\text { Land}&\underline{420,000} & \underline{500,000 }\
\text { Total}&\underline{\$ 600,000} & \underline{\$ 650,000 }\

\end{array}
\end{array}$$ To equalize the exchange, Empire Corporation paid Sally $100,000 in addition to her stock.
a.What amount of gain or loss does Sally realize on the formation of the corporation?
b.What amount of gain or loss, if any, does she recognize?
c.What is Sally's tax basis in the stock she receives in return for her contribution of property to the corporation?
d.What tax basis does Empire Corporation take in the land and building received from Sally?

Quizplus · Accepted Answer

The Answer of Harry and Sally formed Empire Corporation on January 2.Harry contributed cash of $500,000 in return for 50 percent of the corporation's stock.Sally 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}
\begin{array} { c c } 
&\text { FMV } & \text { Tax Basis } \
\text { Building }&180,000 & 150,000 \
\text { Land}&\underline{420,000} & \underline{500,000 }\
\text { Total}&\underline{\$ 600,000} & \underline{\$ 650,000 }\

\end{array}
\end{array}$$ To equalize the exchange, Empire Corporation paid Sally $100,000 in addition to her stock.
a.What amount of gain or loss does Sally realize on the formation of the corporation?
b.What amount of gain or loss, if any, does she recognize?
c.What is Sally's tax basis in the stock she receives in return for her contribution of property to the corporation?
d.What tax basis does Empire Corporation take in the land and building received from Sally?

Harry and Sally Formed Empire Corporation on January 2 To Equalize the Exchange, Empire Corporation Paid Sally $100,000 in Cash