Reg - R4 MC Q&A
Lind and Post organized Ace Corp, which issued voting common stock with a fair
market value of 120,000. They each transferred property in exchange for stock as
follows:
Lind gave a building with an adjusted basis of 40,000 and fair market value of 82,000.
They got 60% of Ace stock from the transaction.
Post gave land with an adjusted basis of 5,000 and fair market value of 48,000. They
got 40% of Ace stock from the transaction.
The building was subject to a 10,000 mortgage that was assumed by Ace. What was
Ace's basis in the building? - (correct answer)$40,000
the adjusted basis carries over to ACE
In April, X and Y formed Z corp. X contributed 50,000 Cash, and Y contributed land
worth 70,000 (with and adjusted basis of 40,000). Y also received 20,000 cash from the
corporation. X and Y each receives 50% of the corporation's stock. What is the tax basis
of the land to Z corp? - (correct answer)60,000
the basis of the peroperty received from the transforer/shareholder is the greater of:
-adjusted net book value plus any gain recognized by the transforer/shareholder
or
-debt assumed by the corporation
Quigley, Roberk, and Storm form a corporation. Quigley exchanges $25,000 of legal
fees for 30 shares of stock. Roberk exchanges land with a basis of $10,000 and a fair
market value of $100,000 for 60 shares of stock. Storm exchanges $10,000 cash for 10
shares of stock. What amount of income should each shareholder recognize? - (correct
answer)Q = 25,000
R = 90,000
,S=0
The 25,000 of legal fees is compensation for services rendered
The FMV - basis for Roberk counts as a gain and must be treated as income
Lind and Post organized Ace Corp, which issued voting common stock with a fair
market value of 120,000. They each transferred property in exchange for stock as
follows:
Lind gave a building with an adjusted basis of 40,000 and fair market value of 82,000.
They got 60% of Ace stock from the transaction.
Post gave land with an adjusted basis of 5,000 and fair market value of 48,000. They
got 40% of Ace stock from the transaction.
The building was subject to a 10,000 mortgage that was assumed by Ace. What amount
of gain did Lind recognize on the exchange? - (correct answer)0
The formation of a corporation under these circumstances is a nontaxable event. Thus
Lind would report zero gain upon the formation of the corporation
The sole shareholder of an S corporaton equipment with a fair market value of 20,000
and a basis of 6,000 subject to a 12,000 liability. What amount is the gain, if any, that
the shareholder must recognize? - (correct answer)6,000
Generally this is a nontaxable transaction
However, since the liabilities ae in excess of the basis, the amount of excess (12,000 -
6,000 = 6,000) is a gain that must be recognized
, Porter, the sole shareholder of Preston Corp, transferred property to the corporation as
a contribution to captial. Two years later, Corley transferred property to the corporation
in exchange for a 10% interest in corporate stock. The property transferred was valued
as follows:
Porter
Basis - 50,000
FMV - 200,000
Corley
Basis - 250,000
FMV - 500,000
What amount represents the corporation's basis in the property received? - (correct
answer)550,000
Porter's transfer:
-meets 80% control test (owns 80% of company)
-therefore, not taxable
-therefore, use carryover basis
Corley's transfer:
-does not meet 80% control test (owns 80% of company)
-therefore, taxable
-therefore, use FMV as basis
In year 2, Cable Corp, a calendar year corporation, contributed 80,000 to a qualified
charitable organization. Cable's year 2 taxable income before the deduction for
chaitable contributions was 820,000 after a 40,000 dividends received deduction. Cable
also had carryover contributions of 10,000 from Year 1. In year 2, what amount can
Cable deduct as charitable contributions? - (correct answer)86,000
Lind and Post organized Ace Corp, which issued voting common stock with a fair
market value of 120,000. They each transferred property in exchange for stock as
follows:
Lind gave a building with an adjusted basis of 40,000 and fair market value of 82,000.
They got 60% of Ace stock from the transaction.
Post gave land with an adjusted basis of 5,000 and fair market value of 48,000. They
got 40% of Ace stock from the transaction.
The building was subject to a 10,000 mortgage that was assumed by Ace. What was
Ace's basis in the building? - (correct answer)$40,000
the adjusted basis carries over to ACE
In April, X and Y formed Z corp. X contributed 50,000 Cash, and Y contributed land
worth 70,000 (with and adjusted basis of 40,000). Y also received 20,000 cash from the
corporation. X and Y each receives 50% of the corporation's stock. What is the tax basis
of the land to Z corp? - (correct answer)60,000
the basis of the peroperty received from the transforer/shareholder is the greater of:
-adjusted net book value plus any gain recognized by the transforer/shareholder
or
-debt assumed by the corporation
Quigley, Roberk, and Storm form a corporation. Quigley exchanges $25,000 of legal
fees for 30 shares of stock. Roberk exchanges land with a basis of $10,000 and a fair
market value of $100,000 for 60 shares of stock. Storm exchanges $10,000 cash for 10
shares of stock. What amount of income should each shareholder recognize? - (correct
answer)Q = 25,000
R = 90,000
,S=0
The 25,000 of legal fees is compensation for services rendered
The FMV - basis for Roberk counts as a gain and must be treated as income
Lind and Post organized Ace Corp, which issued voting common stock with a fair
market value of 120,000. They each transferred property in exchange for stock as
follows:
Lind gave a building with an adjusted basis of 40,000 and fair market value of 82,000.
They got 60% of Ace stock from the transaction.
Post gave land with an adjusted basis of 5,000 and fair market value of 48,000. They
got 40% of Ace stock from the transaction.
The building was subject to a 10,000 mortgage that was assumed by Ace. What amount
of gain did Lind recognize on the exchange? - (correct answer)0
The formation of a corporation under these circumstances is a nontaxable event. Thus
Lind would report zero gain upon the formation of the corporation
The sole shareholder of an S corporaton equipment with a fair market value of 20,000
and a basis of 6,000 subject to a 12,000 liability. What amount is the gain, if any, that
the shareholder must recognize? - (correct answer)6,000
Generally this is a nontaxable transaction
However, since the liabilities ae in excess of the basis, the amount of excess (12,000 -
6,000 = 6,000) is a gain that must be recognized
, Porter, the sole shareholder of Preston Corp, transferred property to the corporation as
a contribution to captial. Two years later, Corley transferred property to the corporation
in exchange for a 10% interest in corporate stock. The property transferred was valued
as follows:
Porter
Basis - 50,000
FMV - 200,000
Corley
Basis - 250,000
FMV - 500,000
What amount represents the corporation's basis in the property received? - (correct
answer)550,000
Porter's transfer:
-meets 80% control test (owns 80% of company)
-therefore, not taxable
-therefore, use carryover basis
Corley's transfer:
-does not meet 80% control test (owns 80% of company)
-therefore, taxable
-therefore, use FMV as basis
In year 2, Cable Corp, a calendar year corporation, contributed 80,000 to a qualified
charitable organization. Cable's year 2 taxable income before the deduction for
chaitable contributions was 820,000 after a 40,000 dividends received deduction. Cable
also had carryover contributions of 10,000 from Year 1. In year 2, what amount can
Cable deduct as charitable contributions? - (correct answer)86,000
