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 $40. 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?
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 $40. 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?
Chapter13: Property Transact Ions: Determination Of Gain Or Loss, Basis Considerations, And Nontaxable Exchanges
Section: Chapter Questions
Problem 5DQ
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Question
![A transfers land to Newco in exchange for 100% of Newco's stock. The land has a basis of $50, FMV of
$100 and is subject to a mortgage of $40.
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?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F78a811db-ae26-48f4-92c7-5c549b2a6960%2Fb806b148-8cea-4120-8b75-b2a499c4ae16%2Fnv3d9e_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A transfers land to Newco in exchange for 100% of Newco's stock. The land has a basis of $50, FMV of
$100 and is subject to a mortgage of $40.
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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