Zhang 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 tax bases: Adjusted Tax Basis Inventory Building Land Total FMV $ 20,000 150,000 230,000 $ 400,000 $ 10,000 100,000 300,000 $410,000 The corporation also assumed a mortgage of $100,000 attached to the building and land. The fair market value of the corporation's stock received in the exchange was $300,000. The transaction met the requirements to be tax-deferred under §351. Note: Negative amount should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable. Required: a. What amount of gain or loss does Zhang realize on the transfer of the property to the corporation? b. What amount of gain or loss does Zhang recognize on the transfer of the property to the corporation?
Zhang 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 tax bases: Adjusted Tax Basis Inventory Building Land Total FMV $ 20,000 150,000 230,000 $ 400,000 $ 10,000 100,000 300,000 $410,000 The corporation also assumed a mortgage of $100,000 attached to the building and land. The fair market value of the corporation's stock received in the exchange was $300,000. The transaction met the requirements to be tax-deferred under §351. Note: Negative amount should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable. Required: a. What amount of gain or loss does Zhang realize on the transfer of the property to the corporation? b. What amount of gain or loss does Zhang recognize on the transfer of the property to the corporation?
Chapter6: Corporations: Redemptions And Liquidations
Section: Chapter Questions
Problem 62P
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Transcribed Image Text:Zhang 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 tax bases:
Inventory
Building
Land
Total
FMV
$ 20,000
150,000
230,000
Adjusted Tax
Basis
$ 10,000
100,000
300,000
$ 400,000
$ 410,000
The corporation also assumed a mortgage of $100,000 attached to the building and land. The fair market value of the corporation's
stock received in the exchange was $300,000. The transaction met the requirements to be tax-deferred under §351.
Note: Negative amount should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.
Required:
a. What amount of gain or loss does Zhang realize on the transfer of the property to the corporation?
b. What amount of gain or loss does Zhang recognize on the transfer of the property to the corporation?
c. What is Zhang's tax basis in the stock received in the exchange?
d. What is the corporation's adjusted tax basis in each of the assets received in the exchange?
e. Assume the corporation assumed a mortgage of $500,000 attached to the building and land. Assume the fair market value of the
building is now $250,000 and the fair market value of the land is $530,000. The fair market value of the stock remains $300,000.
How much, if any, gain or loss does Zhang recognize on the exchange assuming the revised facts?
f. Assume the corporation assumed a mortgage of $500,000 attached to the building and land. Assume the fair market value of the
building is now $250,000 and the fair market value of the land is $530,000. The fair market value of the stock remains $300,000.
What is Zhang's tax basis in the stock received in the exchange?
g. Assume the corporation assumed a mortgage of $500,000 attached to the building and land. Assume the fair market value of the
building is now $250,000 and the fair market value of the land is $530,000. The fair market value of the stock remains $300,000.
What is the corporation's adjusted tax basis in each of the assets received in the exchange?
Note: Do not round intermediate calculations.
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