ACCT MISC – SU12 Exam Questions And Answers Latest 2022/2023

SU12 1. Ames and Roth form Homerun, a C corporation. Ames contributes several autographed baseballs to Homerun. Ames purchased the baseballs for $500, and they have a total fair market value of $1,000. Roth contributes several autographed baseball bats to Homerun. Roth purchased the bats for $5,000, and they have a fair market value of $7,000. What is Homerun’s basis in the contributed bats and balls? A. $0 B. $5,500 C. $6,000 D. $8,000 2. On July 1 of the current year, Rich, sole proprietor of Kee Nail, transferred all of Kee’s assets to Merit, Inc., a new corporation, solely for a certain percentage of Merit’s stock. Dee, who is not related to Rich, also bought some of Merit’s stock on July 1. Merit’s outstanding capital stock consisted of 1,000 shares of common stock with a par value of $100 per share. For the transfer of Kee Nail’s assets to be tax-free, what is the minimum number of shares of Merit’s stock that must be owned by Rich and Dee immediately after the exchange? A. 500 B. 501 C. 800 D. 801 3. In April, A and B formed X Corp. A contributed $50,000 cash, and B contributed land worth $70,000 (with an adjusted basis of $40,000). B also received $20,000 cash from the corporation. A and B each receive 50% of the corporation’s stock. What is the tax basis of the land to X Corp.? A. $40,000 B. $50,000 C. $60,000 D. $70,000 4. In a bona fide transaction, Jesse transferred land worth $50,000 to his 80%-controlled corporation for stock of the corporation worth $20,000 and cash of $20,000. The basis of the property to him was $15,000 and was subject to a $10,000 mortgage, which the corporation assumed. Jesse must report a gain of A. $15,000 B. $20,000 C. $30,000 D. $35,000 5. Feld, the sole shareholder of Maki Corp., paid $50,000 for Maki’s stock 12 years ago. This year, Feld contributed a parcel of land to Maki but was not given any additional stock for this contribution. Feld’s basis for the land was $10,000, and the land’s FMV was $18,000 on the date of the transfer of title. What is Feld’s adjusted basis for the Maki stock? A. $50,000 B. $58,000 C. $60,000 D. $68,000 6. Adams, Beck, and Carr organized Flexo Corp. with authorized voting common stock of $100,000. Adams received 10% of the capital stock in payment for the organizational services that he rendered for the benefit of the newly formed corporation. Adams did not contribute property to Flexo and was under no obligation to be paid by Beck or Carr. Beck and Carr transferred property in exchange for stock as follows: Fair Percentage of Adjuste d Market Flexo Stock Basis Value Acquired Beck $ 5,000 $20,000 20% Carr 60,000 70,000 70% What amount of gain did Carr recognize from this transaction? A. $40,000 B. $15,000 C. $10,000 D. $0 7. Clark and Hunt organized Jet Corp. with authorized voting common stock of $400,000. Clark contributed $60,000 cash. Both Clark and Hunt transferred other property in exchange for Jet stock as follows: Other Property Fair Percentage of Adjusted Market Jet Stock Basis Value Acquired Clar k $ 50,000 $100,000 40% Hunt 120,000 240,000 60% What was Clark’s basis in Jet stock? A. $0 B. $100,000 C. $110,000 D. $160,000 8. Rela Associates, a partnership, transferred all of its assets, with a basis of $300,000, subject to liabilities of $50,000, to a newly formed corporation in return for all of the corporation’s stock. Rela then distributed this stock to the partners in liquidation. In connection with this incorporation of the partnership, Rela recognizes A. No gain or loss on the transfer of its assets nor on the assumption of its liabilities by the corporation. B. Gain on the assumption of its liabilities by the corporation. C. Gain or loss on the transfer of its assets to the corporation. D. Gain, but not loss, on the transfer of its assets to the corporation. 9. Jones incorporated a sole proprietorship by exchanging all the proprietorship’s assets for the stock of Nu Co., a new corporation. To qualify for tax-free incorporation, Jones must be in control of Nu immediately after the exchange. What percentage of Nu’s stock must Jones own to qualify as “control” for this purpose? A. 50.00% B. 51.00% C. 66.67% D. 80.00%