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Frank, Sara, and Gilbert form FSG Services, Inc., an S corporation, by contributing the following properties: Basis Shareholder Frank Property Cash Value 150,000 80,000 150,000 80,000 Sara Cash Equipment Land and Building 40,000 70,000 Gilbert Liability on building contributed by Gilbert assumed by corporation 220,000 300,000 100,000 The three shareholders above own 30%, 30%, and 40% of the corporation respectively. Sara also loans the corporation $50,000 and the debt is evidenced by an executed corporate note. During the year, the corporation earns ordinary operating income before officer salaries of $400,000. Frank, Sara, and Gilbert earn officer salaries of $20,000, $100,000, and $140,000 respectively. In addition to these payments, each shareholder also takes a $20,000 cash distribution during the year. 6) What is Frank's basis for his stock at formation? 7) What is Sara's basis in stock at formation? 8) What is Gilbert's basis in stock at formation?

Frank, Sara, and Gilbert form FSG Services, Inc., an S corporation, by contributing the following properties: Basis Shareholder Frank Property Cash Value 150,000 80,000 150,000 80,000 Sara Cash Equipment Land and Building 40,000 70,000 Gilbert Liability on building contributed by Gilbert assumed by corporation 220,000 300,000 100,000 The three shareholders above own 30%, 30%, and 40% of the corporation respectively. Sara also loans the corporation $50,000 and the debt is evidenced by an executed corporate note. During the year, the corporation earns ordinary operating income before officer salaries of $400,000. Frank, Sara, and Gilbert earn officer salaries of $20,000, $100,000, and $140,000 respectively. In addition to these payments, each shareholder also takes a $20,000 cash distribution during the year. 6) What is Frank's basis for his stock at formation? 7) What is Sara's basis in stock at formation? 8) What is Gilbert's basis in stock at formation?

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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Use the following data for Questions 6-11 Frank, Sara, and Gilbert form FSG Services, Inc., an S corporation, by contributing the following properties: Value Shareholder Frank Sara Basis Property Cash 150,000 80,000 150,000 80,000 Cash Equipment Land and Building 40,000 220,000 70,000 Gilbert 300,000 Liability on building contributed by Gilbert assumed by corporation 100,000 The three shareholders above own 30%, 30%, and 40% of the corporation respectively. Sara also loans the corporation $50,000 and the debt is evidenced by an executed corporate note. During the year, the corporation earns ordinary operating income before officer salaries of $400,000. Frank, Sara, and Gilbert earn officer salaries of $20,000, $100,000, and $140,000 respectively. In addition to these payments, each shareholder also takes a $20,000 cash distribution during the year. 6) What is Frank's basis for his stock at formation? 7) What is Sara's basis in stock at formation? 8) What is Gilbert's basis in stock at formation? 9) What is Sara's basis for absorbing pass-through losses at formation? 10) What is Gilbert's stock basis after the first year?
Transcribed Image Text:Use the following data for Questions 6-11 Frank, Sara, and Gilbert form FSG Services, Inc., an S corporation, by contributing the following properties: Value Shareholder Frank Sara Basis Property Cash 150,000 80,000 150,000 80,000 Cash Equipment Land and Building 40,000 220,000 70,000 Gilbert 300,000 Liability on building contributed by Gilbert assumed by corporation 100,000 The three shareholders above own 30%, 30%, and 40% of the corporation respectively. Sara also loans the corporation $50,000 and the debt is evidenced by an executed corporate note. During the year, the corporation earns ordinary operating income before officer salaries of $400,000. Frank, Sara, and Gilbert earn officer salaries of $20,000, $100,000, and $140,000 respectively. In addition to these payments, each shareholder also takes a $20,000 cash distribution during the year. 6) What is Frank's basis for his stock at formation? 7) What is Sara's basis in stock at formation? 8) What is Gilbert's basis in stock at formation? 9) What is Sara's basis for absorbing pass-through losses at formation? 10) What is Gilbert's stock basis after the first year?
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