Ramon incorporated his sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percentof the corporation's stock. The property transferred to the corporation had the following fair market values and adjusted tax bases:InventoryBuildingLandTotalFMV$ 10,00050,000100,000$ 160,000Adjusted TaxBasis$ 4,00030,00050,000$ 84,000The fair market value of the corporation's stock received in the exchange equaled the fair market value of the assets transferred to thecorporation by Ramon.Note: Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.Required:a. What amount of gainloss does Ramon realize on the transfer of the property to his corporation?b. What amount of gain or loss does Ramon recognize on the transfer of the property to his corporation?c. What is Ramon's basis in the stock received in the new corporation?Required AComplete this question by entering your answers in the tabs below.Answer is complete but not entirely correct.Required B Required C

Realizing and recognizing gains or losses are two different things: realizing is when a gain or loss…

Answered: FMV $ 10,000 50,000 100,000 $ 160,000…

FMV $ 10,000 50,000 100,000 $ 160,000 Adjusted Tax Basis $ 4,000 30,000 50,000 $ 84,000 lue of the corporation's stock received in the exchange equaled the fa

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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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

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:
Inventory
Building
Land
Total
FMV
$ 10,000
50,000
100,000
$ 160,000
Adjusted Tax
Basis
$ 4,000
30,000
50,000
$ 84,000
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.
Note: Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.
Required:
a. What amount of gain
loss does Ramon realize on the transfer of the property to his corporation?
b. What amount of gain or loss does Ramon recognize on the transfer of the property to his corporation?
c. What is Ramon's basis in the stock received in the new corporation?
Required A
Complete this question by entering your answers in the tabs below.
Answer is complete but not entirely correct.
Required B Required C

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