A and B organized Newco, Inc. A contributed a building with a basis of $40,000 and a FMV of $82,000 in exchange for 60% of the common stock. B contributed land with a basis of $5,000 and a FMV of$48,000 in exchange for 40% of its capital stock. The building contributed by A was subject to a $10,000 mortgage which Newco assumed. A's recognized gain on the exchange is:
A and B organized Newco, Inc. A contributed a building with a basis of $40,000 and a FMV of $82,000 in exchange for 60% of the common stock. B contributed land with a basis of $5,000 and a FMV of$48,000 in exchange for 40% of its capital stock. The building contributed by A was subject to a $10,000 mortgage which Newco assumed. A's recognized gain on the exchange is:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Urmila ben
Transcribed Image Text:8 A and B organized Newco, Inc. A contributed a building with a basis of $40,000 and a
FMV of $82,000 in exchange for 60% of the common stock. B contributed land with a
basis of $5,000 and a FMV of$48,000 in exchange for 40% of its capital stock. The
building contributed by A was subject to a $10,000 mortgage which Newco assumed.
A's recognized gain on the exchange is:
a. $0
b. $10,000
c. $42,000
d. $52,000
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