Gearty and Olinto organized The Worthington Corp., which issued voting common stock with a fair market value of $240,000. They each transferred property in exchange for stock as follows: Property Gearty Building Olinto Land The building was subject to a $20,000 mortgage that was assumed by The Worthington Corp. What was The Worthington Corp.'s basis in the building? a. $60,000 b. $80,000 c. $144,000 d. $164,000 Adjusted Basis $80,000 10,000 Fair Market Value $164,000 96,000 Percentage of The Worthington Corp. Stock Acquired 60% 40%

Gearty and Olinto organized The Worthington Corp., which issued voting common stock with a fair market value of $240,000. They each transferred property in exchange for stock as follows: Property Gearty Building Olinto Land The building was subject to a $20,000 mortgage that was assumed by The Worthington Corp. What was The Worthington Corp.'s basis in the building? a. $60,000 b. $80,000 c. $144,000 d. $164,000 Adjusted Basis $80,000 10,000 Fair Market Value $164,000 96,000 Percentage of The Worthington Corp. Stock Acquired 60% 40%

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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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 FMV Basis $ 21,500 54,750 139,000 $ 9,200 47,000 Inventory Building Land 69,000 $ 215,250 $ 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.) a. What amount of gain or loss does Ramon realize on the transfer of the property to his corporation? Gain or loss realized
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Corporate Organization Exercise Kathy and Carl formed a corporation by each contributing an asset with a FMV of $50,000 for half of the stock in the corporation. Prior to the transfer, Kathy had an adjusted basis of $40,000 in her asset and Carl had an adjusted basis of $60,000 in his asset. h. Does Carl have any positive or negative consequences if the corporation sells Kathy's asset for $50,000 ? Quantify the impact assuming the corporation's marginal tax rate is 21%. Answer the following assuming Carl and the corporation did not make the election i. What is Carl's realized loss on the transaction?
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What is Elaine’s basis in her Forest Corporation stock?
Answer
Rob transferred the following assets and liabilities to Warble Corporation. Adjusted Basis Fair Market Value Building $210,000 $225,000 Equipment 45,000 75,000 Trucks 15,000 30,000 Mortgage(held 30,000 30,000 for four years) on building In return, Rob received $75,000 in cash plus 90% of Warble Corporation's only class of stock outstanding (fair market value of $225,000).