Cornelia transfers property valued at $500 (basis = $350) to Wayside Corporation

Question

Cornelia transfers property valued at $500 (basis = $350) to Wayside Corporation in exchange for 50 percent of its stock. Ferdinand transfers property valued at $450 (basis = $260) in exchange for 40 percent of Wayside’s stock and $50 cash. Cheryl transfers $100 cash in exchange for the remaining 10% of the stock. a.What are Cornelia’s and Ferdinand’s realized gains or losses? b.What are their recognized gains or losses? c. What are their bases in Wayside’s stock? d.What is Wayside’s basis in the property received? e.Does Wayside have any other tax consequences? PLEASE PROVIDE EXPLANATION AND CALCULATION FOR EACH STEP.

Explanation / Answer

a. No realized gain for Cornelia's and Ferdinand's since Cornelia's did not recieved any cash from Wayside and Ferdinand recieved cash $50 which is less than Basis=$260.

b. Recognized Gain for Cornelia's $150 and for Ferdinand's $190.

c. Cornelia's shall record on his books $500 as Investment in Wayside and Ferdinand's shall record on his books $400 as Investment in wayside.

d. Wayside's shall record on his books $500 and $450 for property of Cornelia's and Ferdinand's.

e. No Tax Conseqences for Wayside

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