Question type:1. Facts for Questions A through D: In the five situations describ
ID: 2498033 • Letter: Q
Question
Question type:1.
Facts for Questions A through D: In the five situations described below in an incorporation transaction qualifying under Code Section 351, Nancy transfers accounts receivable and land to Newco Corporation. The accounts receivable have a fair market value of $100 and a basis to Nancy of $30 and the land has a fair market value of $100 and a basis to Nancy of $80. The fair market value of Newco Corporation stock is stated below, as well as the fair market value of any other consideration Nancy gets.
A. Nan receives stock worth $100 and cash of $100. What is Nan’s basis in her Newco Corporation stock?
a. $110
b. $70
c. $80
d. $200
e. None of the above
B. Nan receives Newco Corporation stock worth $100, and Newco Corporation assumes a $100 incurred liability of Nan with no improper tax motive on the part of Newco Corporation or Nan. What is Nan’s basis in her Newco Corporation stock?
a. $110
b. $80
c. $10
d. $200
e. None of the above
C. Nan receives Newco Corporation stock worth $100, and Newco Corporationassumes a $100 incurred liability of Nan with an improper tax motive on the part of Nan. What is Nan’s basis in her Newco Corporation stock?
a. $60
b. $80
c. $10
d. $200
e. None of the above
D.Nan receives Newco Corporation stock worth $70, and Newco Corporation assumes a $130 incurred liability of N with no improper tax motive on the part of Newco Corporation or Nan. What is Nan’s basis in her Newco Corporation stock?
a. $60
b. $70
c. $200
d. $0
e. None of the above
Explanation / Answer
A d. $200
Note:- Corporation basis in the property in new corporation =ajusted basis + gain for tax purpose
For Receivable :
$30 + ($100 - $30) = $30 + $70 = $100
For land :
$80 + ($100 -$80) = $80 + $20 = $100
$200
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