1.Bonnie, Olivia, Warren and Andy form Lobster Corporation with the followinginvestments:Basis toSharesTransferorFMVIssuedFrom Bonnie-Personal services renderedto Lobster Corporation$ -0-$30,00030From Olivia-Equipment$345,000$300,000270From Warren-CashUnrealized accounts receivable$60,000-0-$60,00090,000150From Andy-Land and buildingMortgage on land and building$210,000300,000$450,000300,000150The mortgage transferred by Andy is assumed by Lobster Corporation. The value of each shareof Lobster Corporation stock is $1,000. Olivia receives $30,000 cash in addition to the 270shares.Required:What are the tax consequences (i.e. realized gain/loss; recognized gain/loss; basis)to each of the transferors and Lobster Corporation as a result of the formation?

It is the gain achieved when the value of an asset or investment transferred is higher than the…

Answered: Bonnie, Olivia, Warren and Andy form…

Business

Accounting

Bonnie, Olivia, Warren and Andy form Lobster Corporation with the following investments:

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter12: Corporations: Organization, Capital Structure, And Operating Rules

Section: Chapter Questions

Problem 29P

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Question

1.
Bonnie, Olivia, Warren and Andy form Lobster Corporation with the following
investments:
Basis to
Shares
Transferor
FMV
Issued
From Bonnie-
Personal services rendered
to Lobster Corporation
$ -0-
$30,000
30
From Olivia-
Equipment
$345,000
$300,000
270
From Warren-
Cash
Unrealized accounts receivable
$60,000
-0-
$60,000
90,000
150
From Andy-
Land and building
Mortgage on land and building
$210,000
300,000
$450,000
300,000
150
The mortgage transferred by Andy is assumed by Lobster Corporation. The value of each share
of Lobster Corporation stock is $1,000. Olivia receives $30,000 cash in addition to the 270
shares.
Required:
What are the tax consequences (i.e. realized gain/loss; recognized gain/loss; basis)
to each of the transferors and Lobster Corporation as a result of the formation?

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