In 2020, Martin and Rebecca formed White Corporation.  Martin transfers real estate with an adjusted basis of $260,000 and a fair market value of $350,000 to the newly formed White Corporation in exchange for 75% of the common stock of White Corporation.  The real estate was encumbered by a mortgage of $275,000 which White Corporation assumed. Rebecca contributed equipment with a fair market value of $35,000 and an adjusted basis of $15,000 in exchange for 25% of the common stock and a $10,000 bond.   What is the amount of gain or loss realized and recognized by Martin on the transfer of the real estate? What basis does Martin take in White Corporation stock? What basis does White Corporation take in the real estate contributed by Martin? What is the amount of gain or loss realized and recognized by Rebecca on the transfer of the equipment? What basis does Rebecca take in White Corporation stock? What basis does White Corporation take in the equipment contributed by Rebecca?

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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.