28. BC and OP are both private not-for-profitentities. They combine to create LM, a newprivate not-for-profit entity with an entirelynew board of directors. BC holds land witha book value of $300,000 and a fair valueof $400,000. OP holds land with a bookvalue of $500,000 and a fair value of$550,000. After LM has been formed,what is the reported value of the landaccount?a. $800,000b. $850,000c. $900,000d. $950,000

The question is asking for the reported value of the land account after the formation of the new…

Answered: 28. BC and OP are both private…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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When Kevin and Marshall formed the equal KM LLC, the fair market values of their interests were each $100,000. Kevin contributed $60,000 cash, equipment with a basis of $0 and a fair market value of $10,000, and a small parcel of land in which he had a basis of $50,000 and that was valued at $30,000. Marshall contributed receivable that was valued at $100,000 and in which his basis was $0. Calculate Kevin and Marshall’s basis in the property. DO NOT GIVE SOLUTION IN IMAGE FORMAT
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 FMV Basis $ 56,000 420,000 644,000 $ 1,120,000 $ 28,000 280,000 840,000 Inventory Building Land $ 1,148,000 Total 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 $1,020,000. The transaction met the requirements to be tax-deferred under §351. (Negative amount should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.) Assume the corporation assumed a mortgage of $1,220,000 attached to the building and land. Assume the fair market value of the building is now $700,000 and the fair market value of the land is $1,484,000. The fair market value of the stock remains…
[The following information applies to the questions displayed below.]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 bases: FMV Adjusted Basis Inventory $ 68,000 $ 34,000 Building 510,000 340,000 Land 782,000 1,020,000 Total $ 1,360,000 $ 1,394,000 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 $1,260,000. The transaction met the requirements to be tax-deferred under §351. (Negative amount should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.) a. What amount of gain or loss does Zhang realize on the transfer of the property to her corporation? C. What is Zhang’s tax basis in the…
Ramon incorporated his 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 bases: FMV Adjusted Basis Inventory $ 15,750 $ 9,500 Building 71,500 54,750 Land 195,000 72,500 Total $ 282,250 $ 136,750 The fair market value of the corporation’s stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Ramon. b. What amount of gain or loss does Ramon recognize on the transfer of the property to his corporation? c. What is Ramon’s basis in the stock he receives in his corporation?
Castle and Dave formed an S corporation that is owned as follows: Castle 75% and Dave 25%. The corporation distributes an asset to each owner. The corporation has a basis of $45,000 for each asset. The fair market value of each of the assets is as follows: Castle $90,000 and Dave $50,000. a. What is the recognized gain for the corporation? b. How much of the gain does Castle report? c. How much of the gain does Dave report?
(3) ABC Corporation distributes a building to Green, an individual and fifty (50) percent shareholder. The building has a FMV of $50,000 and an adjusted basis of $32,000. The building was encumbered by a $20,000 liability at the time of its distribution to Green. Without considering the distribution of the building to Green, ABC Corporation had earnings and profits of $26,500. Green adjusted basis in his interest in ABC Corporation was equal to $15,000. (a) What is the amount of the section 301 distribution to Green? (b) What is Green's basis in the building following its distribution to Green? (c) What is the amount of gain recognized by ABC Corporation as a result of the distribution of the building to Green? (d) What is the character of the distribution to Green and what is the amount of ABC's earnings and profits following the distribution?
3. Ramon incorporated his 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: FMV Adjusted Tax Basis Inventory $ 10,000 $ 4,000 Building 50,000 30,000 Land 100,000 50,000 Total $ 160,000 $ 84,000 The fair market value of the corporation’s stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Ramon. (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) What is Ramon’s basis in the stock he receives in his corporation?
Ramon incorporated his 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 $ 10,000 50,000 100,000 $ 160,000 Adjusted Tax Basis $ 4,000 30,000 50,000 $ 84,000 The fair market value of the corporation's stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Ramon. Note: Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign. Required: a. What amount of gain loss does Ramon realize on the transfer of the property to his corporation? b. What amount of gain or loss does Ramon recognize on the transfer of the property to his corporation? c. What is Ramon's basis in the stock received in the new corporation? Required A Complete this question by entering your answers in…
Ramon incorporated his 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 FMV $ 21,500 54,750 139,000 $ 215,250 $ 9,200 47,000 Inventory Building Land 69,000 $ 125,200 Total The fair market value of the corporation's stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Ramon. (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) c. What is Ramon's basis in the stock he receives in his corporation? Tax basis
Leah transfers equipment (basis of $400,000 and fair market value of $500,000) for additional stock in Crow Corporation. After the transfer, Leah owns 80% of Crow's stock. Associated with the equipment is Section 1245 depreciation recapture potential of $70,000. As a result of the transfer, Leah recognizes ordinary income of $70,000. the Section 1245 depreciation recapture potential carries over to Crow Corporation. the Section 1245 depreciation recapture potential disappears. Leah recognizes ordinary income of $70,000 and 1231 gain of $30,000. None of the above
ITA 86(1) is often referred to as an estate freeze. Mrs. X. holds all the outstanding 1,000 common shares of a private corporation with an Adjusted Cost Base (ACB) of $1,000 and the current fair market value (FMV) of the shares is $500,000, Mrs. X would like to freeze the value of her shareholding and pass on the future growth of the corporation to her adult children, Y and Z. To accomplish the ITA 86(1) estate freeze, O A. Mrs. X sells her common shares to Y and Z for $250,000 each. OB. Mrs. X sells her common share to Y and Z for $500 each. O C. Mrs. X exchanges her 1,000 common shares for redeernable preferred shares with a total redemption value of $1,000. D. Mrs. X exchanges her 1,000 common shares for redeemable preferred shares with a total rodemption value of $500,000.

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