A transfers land to Newco in exchange for 100% of Newco's stock The land has a basis of $50, FMV of S100 and is subject to a mortgage of S40. A) What are the consequences to each of the parties? B) Suppose in that the mortgage was placed on the property immediately before the transfer to Newco. A wanted cash in order to buy a yacht to be used for personal purposes, so he took out a mortgage on the land. Would this change your answer 9 Suppose instead that the mortgage was for $60. Suppose further that this mortgage was incurred on the purchase of the property many years ago. Would this change your answer? D) Same as (c) except that A also transfers accounts payable of $10. A is a cash basis taxpayer. How would this change vour answer?

A transfers land to Newco in exchange for 100% of Newco's stock The land has a basis of $50, FMV of S100 and is subject to a mortgage of S40. A) What are the consequences to each of the parties? B) Suppose in that the mortgage was placed on the property immediately before the transfer to Newco. A wanted cash in order to buy a yacht to be used for personal purposes, so he took out a mortgage on the land. Would this change your answer 9 Suppose instead that the mortgage was for $60. Suppose further that this mortgage was incurred on the purchase of the property many years ago. Would this change your answer? D) Same as (c) except that A also transfers accounts payable of $10. A is a cash basis taxpayer. How would this change vour answer?

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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Question

100%

A transfers land to Newco in exchange for 100% of Newco's stock. The land has a basis of $50, FMV of
S100 and is subject to a mortgage of S40.
A) What are the consequences to each of the parties?
B) Suppose in that the mortgage was placed on the property immediately before the transfer to Newco. A
wanted cash in order to buy a yacht to be used for personal purposes, so he took out a mortgage on the
land. Would this change your answer
C) Suppose instead that the mortgage was for $60. Suppose further that this mortgage was incurred on the
purchase of the property many years ago. Would this change your answer?
D) Same as (c) except that A also transfers accounts payable of $10. A is a cash basis taxpayer. How would
this change your answer?

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