Carla incorporated her sole proprietorship by transferring inventory, a building

Question

Carla 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 bases:

The corporation also assumed a mortgage of $143,250 attached to the building and land. The fair market value of the corporation’s stock received in the exchange was $334,500. (Negative amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)

a. What amount of gain or loss does Carla realize on the transfer of the property to the corporation?

Breakdown

b. What amount of gain or loss does Carla recognize on the transfer of the property to her corporation?

c. What is Carla’s basis in the stock she receives in her corporation?

FMV Adjusted Basis Inventory $ 36,250 $ 18,600 Building 167,000 111,000 Land 274,500 391,000 Total $ 477,750 $ 520,600

Explanation / Answer

Part 1 - Calculation of gain/loss carla realised

Part 2 - Carla will not recognise any loss since carla did not received any 'boot' in the exchange hence no loss should be recognised

Part 3 Calculation of carla's basis in stock

Particulars Amount Fair Market value of stock received $334500 Add : Mortgage assumed by corporation $143250 Amount Realized (A) $477750 Adjusted tax basis of property transferred (B) $520600 Amount of loss (A-B) -$42850

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---