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Betty forms a corporation by transferring land worth $100,000 for 100% of the stock of the corporation. Betty paid $30,000 for the land. a. How much gain or loss do Betty and the corporation recognize on the transfer? b. What is Betty's basis in her shares of stock in the corporation? c. What is the corporation's basis in the land?

Betty forms a corporation by transferring land worth $100,000 for 100% of the stock of the corporation. Betty paid $30,000 for the land. a. How much gain or loss do Betty and the corporation recognize on the transfer? b. What is Betty's basis in her shares of stock in the corporation? c. What is the corporation's basis in the land?

FINANCIAL ACCOUNTING
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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uestion 2 Forming a Corporation. Betty forms a corporation by transferring land worth $100,000 for 100% of the stock of the corporation. Betty paid $30,000 for the land. a. How much gain or loss do Betty and the corporation recognize on the transfer? b. What is Betty's basis in her shares of stock in the corporation? c. What is the corporation's basis in the land?
Transcribed Image Text:uestion 2 Forming a Corporation. Betty forms a corporation by transferring land worth $100,000 for 100% of the stock of the corporation. Betty paid $30,000 for the land. a. How much gain or loss do Betty and the corporation recognize on the transfer? b. What is Betty's basis in her shares of stock in the corporation? c. What is the corporation's basis in the land?
Question 5 Forming a Corporation and Shareholder's Basis Toby contributes $60,000 cash in exchange for stock in the corporation. Keith contributes land worth $70,000 (basis of $55,000) in exchange for $10,000 cash and $60,000 worth of stock in the corporation. After the transfer, Toby and Keith own 100% of the corporation. a. How much gain or loss do Toby, Keith, and the corporation recognize on the transfer? Remember, if the transferring investors own at least 80% of the stock in the corporation, neither the investor nor the corporation recognizes gain or loss on the transfer. b. What is Toby's basis in the stock? c. What is Keith's basis in the stock? d. What is the corporation's basis in the land? Question 11 Corporation Taxable Income. a. For the current year, Wish Corporation had ordinary income from operations of $80,000, a net long-term capital gain of $17,000, and a net short-term capital loss of $7,000. Compute Wish's taxable income for the year. b. For the current year, BB Corporation had net income from operations of $65,000 and a net long-term capital loss or $9,000. It also had a net short-term capital gain of $7,000. Compute BB's taxable income for the year. c. For the current year, before considering capital loss carryovers, Adam Corporation had a net long-term capital loss of $8,000 and a net short-term capital loss of $3,000. Its net capital loss carryover from last year was $2,000. How much is Adam's capital loss carryover to the next year, and what is its nature (long-term or short-term)?
Transcribed Image Text:Question 5 Forming a Corporation and Shareholder's Basis Toby contributes $60,000 cash in exchange for stock in the corporation. Keith contributes land worth $70,000 (basis of $55,000) in exchange for $10,000 cash and $60,000 worth of stock in the corporation. After the transfer, Toby and Keith own 100% of the corporation. a. How much gain or loss do Toby, Keith, and the corporation recognize on the transfer? Remember, if the transferring investors own at least 80% of the stock in the corporation, neither the investor nor the corporation recognizes gain or loss on the transfer. b. What is Toby's basis in the stock? c. What is Keith's basis in the stock? d. What is the corporation's basis in the land? Question 11 Corporation Taxable Income. a. For the current year, Wish Corporation had ordinary income from operations of $80,000, a net long-term capital gain of $17,000, and a net short-term capital loss of $7,000. Compute Wish's taxable income for the year. b. For the current year, BB Corporation had net income from operations of $65,000 and a net long-term capital loss or $9,000. It also had a net short-term capital gain of $7,000. Compute BB's taxable income for the year. c. For the current year, before considering capital loss carryovers, Adam Corporation had a net long-term capital loss of $8,000 and a net short-term capital loss of $3,000. Its net capital loss carryover from last year was $2,000. How much is Adam's capital loss carryover to the next year, and what is its nature (long-term or short-term)?
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