Adams transfers Blackacre to Newco in exchange for 100% of its common stock.  Adams acquired Blackacre for $50,000 cash plus a purchase money mortgage of $200,000.  Adams has claimed $100,000 of depreciation on Blackacre and has paid $80,000 of the purchase money mortgage.  Blackacre had a FMV of $400,000 at the time of the transfer.    What are the tax consequences to Adams and Newco?   Assume Adams had paid only $30,000 of the purchase money mortgage, how would that affect your answer to part (a)?   Assume in part (b) that Adams transferred $20,000 of cash to Newco along with Blackacre, how would that affect your answer to part (a)?   Assume in part (b) that Adams had transferred his own promissory note maturing in 2 years with a face value of $20,000 to Newco along with Blackacre, how would that affect your answer to part (b)?   Assume in part (d) that the note Adams transferred had been received by him at the time he loaned $20,000 to Harry. How would that affect your answer to part (d)?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Adams transfers Blackacre to Newco in exchange for 100% of its common stock.  Adams acquired Blackacre for $50,000 cash plus a purchase money mortgage of $200,000.  Adams has claimed $100,000 of depreciation on Blackacre and has paid $80,000 of the purchase money mortgage.  Blackacre had a FMV of $400,000 at the time of the transfer. 

 

  • What are the tax consequences to Adams and Newco?

 

  • Assume Adams had paid only $30,000 of the purchase money mortgage, how would that affect your answer to part (a)?

 

  • Assume in part (b) that Adams transferred $20,000 of cash to Newco along with Blackacre, how would that affect your answer to part (a)?

 

  • Assume in part (b) that Adams had transferred his own promissory note maturing in 2 years with a face value of $20,000 to Newco along with Blackacre, how would that affect your answer to part (b)?

 

  • Assume in part (d) that the note Adams transferred had been received by him at the time he loaned $20,000 to Harry. How would that affect your answer to part (d)?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Accounting for Liquidation of Companies
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education