Albert transfers land(basis of $140 000 and fair market value ofS320 000) to Gol

Question

Albert transfers land(basis of $140 000 and fair market value ofS320 000) to Gold Corporation for 80% of its stock and a oote payable in the amount of $8$0,000 Gold assumes Albert's mortgage on the land of e. None of the above. 30. a. Albert has a recognized gaim on the transfer of $140,000 b. Albert has a recognized gain on the transfer of $80,000 c. Albert has a recognized gain on the transfer of $60,000 d. Gold Corporation has a basis in the land of $220,000 $200,000. None of the above. e. 31, Kim owns 100% of the stok ofCardinal Corporation In the current year Kim transfers an installment obligation, tax basis of $30,000 and fair market value of $200,000, for additional stock in Cardinal worth a Kim recognizes no taxable gain on the transfer. b. Kim has a taxable gain of $170,000 c. Kim has a taxable gain of $180,000. d. Kim has a basis of $200,000 in the additional stock she received in Cardinal Corporation. e. None of the above. in the additional stock she received in Cardinal Corporation 2 Wade and Paul form Swan Corporation with the following investments. Wade transfers machinery (basis of $40,000 and fair market value of $100,000), while Paul transfers land (basis of $20,000 and fair market value of $90,000) and services rendered (worth $10,000) in organizing the corporation. Each is issued 25 shares in Swan Corporation With respect to the transfers a Wade has no recognized gain Paul recognizes income/gain of $80,000. Neither Wade nor Paul has recognized gain or income on the transfers. c Swan Corporation has a basis of $30,000 in the land transferred by Paul. d Paul has a basis of $30,000 in the 25 shares he acquires in Swan Corporation e. None of the above ? Rob and Sharon form Swallow Corporation with the following consideration: Adjusted Fair Market Basis $400,000 500,000 From Rob- Valus $400,000 440,000 Cash From Sharon- Land Each recerves 50% ofSwallow's stock. In addition, Sharon receives cash of S40.000. One result of these transfers is that Sharon has a: a. Recognmized loss of $60,000 b. Recogmized loss of $20,000. e. Basis of$460,000 in the Swallow stock (assuming Swallow reduces its basis in the land to $440,000) d Basis of S400,000 in the Swallow stock (assuming Swallow reduces its basis in the land to $440,000) e. None of the above

Explanation / Answer

30. Answer: Albert has a recognized gain on the transfer of $140,000

Explanation: The mortgage value on the land exceeds Albert’s basis in the land by $60,000 and this is recognized as gain under § 357(c). Gold Corporation’s note payable of $80,000 is treated as boot here. So, Albert’s recognized gain is $140,000.

Gold Corporation’s basis in the land is $280,000 i.e. [$140,000 (Albert’s basis) + $140,000 (recognized gain)]

31. Answer: Kim recognizes no taxable gain on the transfer.This answer is correct.

Explanation: Here the  installment obligation qualifies as "property" under § 351. So, Kim recognizes no gain on the transfer. Cardinal has a basis of $30,000 in the installment obligation.

32. Answer: Paul has a basis of $30,000 in the 25 shares he acquires in Swan Corporation.

Explantion: Here Wade has no recognized gain on the transfer; Again Paul has a recognized gain of $10,000 representing the stock received for services rendered. Swan Corporation has a basis of $40,000 in the machinery and $20,000 in the land. Paul has a basis of $30,000 in the stock in Swan Corporation [$20,000 (basis of land) + $10,000 (gain recognized on value of services rendered).

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