Jorge contributed land he held as an investment (fair market value $120,000; basis $55,000) and inventory (fair market value $80,000; basis $75,000) to ABC Corporation in exchange for 50 percent of the ABC stock (50 shares valued at $160,000) and $40,000 cash in a qualifying §351 exchange. (Leave no answer blank. Enter zero if applicable.) a. What amount of gain does Jorge recognize on the exchange? What is the character of the gain? What would be Jorge's basis in his ABC stock after the exchange?
Jorge contributed land he held as an investment (fair market value $120,000; basis $55,000) and inventory (fair market value $80,000; basis $75,000) to ABC Corporation in exchange for 50 percent of the ABC stock (50 shares valued at $160,000) and $40,000 cash in a qualifying §351 exchange. (Leave no answer blank. Enter zero if applicable.) a. What amount of gain does Jorge recognize on the exchange? What is the character of the gain? What would be Jorge's basis in his ABC stock after the exchange?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Subject: acounting
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Required information
[The following information applies to the questions displayed below.]
Jorge contributed land he held as an investment (fair market value
$120,000; basis $55,000) and inventory (fair market value $80,000;
basis $75,000) to ABC Corporation in exchange for 50 percent of
the ABC stock (50 shares valued at $160,000) and $40,000 cash in a
qualifying §351 exchange. (Leave no answer blank. Enter zero if
applicable.)
a. What amount of gain does Jorge recognize on the exchange? What is the
character of the gain? What would be Jorge's basis in his ABC stock after the
exchange?
Gain recognized on the Land
Gain recognized on the inventory
Jorge's adjusted basis in the stock
$
24,000
5,000
Capital gain
Ordinary income](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc7fe5a73-45e4-4166-8ba1-50e355550dfc%2F89947f2e-d391-4b9d-8327-4849599e4689%2Fngbrmtk_processed.png&w=3840&q=75)
Transcribed Image Text:!
Required information
[The following information applies to the questions displayed below.]
Jorge contributed land he held as an investment (fair market value
$120,000; basis $55,000) and inventory (fair market value $80,000;
basis $75,000) to ABC Corporation in exchange for 50 percent of
the ABC stock (50 shares valued at $160,000) and $40,000 cash in a
qualifying §351 exchange. (Leave no answer blank. Enter zero if
applicable.)
a. What amount of gain does Jorge recognize on the exchange? What is the
character of the gain? What would be Jorge's basis in his ABC stock after the
exchange?
Gain recognized on the Land
Gain recognized on the inventory
Jorge's adjusted basis in the stock
$
24,000
5,000
Capital gain
Ordinary income
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