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Ollie: Receives 500 shares of stock Land and Building 30,000 100,000 • Mortgage on land & building (assumed by TOBY, INC.) 60,000 1. Does James have income, gain or loss on the transaction in which he receives stock in TOBY, INC.? Indicate the amount of any income, gain, or loss. total gain recognized- $40,000 2. What is James's basis in TOBY, INC. stock? $5,000+Ş40,000= $45,000 3. Does Jenna have income, gain, or loss on the transaction in which she receives stock in TOBY, INC.? Indicate the amount of any income, gain, or loss. 4. What is Jenna's basis in TOBY, INC. stock? $20,000+ $10,000= $30,000 5. Does Ollie have income, gain, or loss on the transaction in which he receives stock in TOBY, INC.? Indicate the amount of any income, gain, or loss. 6. What is Ollie's basis in his TOBY, INC. stock? 30,000-60000+30000-0 7. What basis does TOBY, INC. have in:

Ollie: Receives 500 shares of stock Land and Building 30,000 100,000 • Mortgage on land & building (assumed by TOBY, INC.) 60,000 1. Does James have income, gain or loss on the transaction in which he receives stock in TOBY, INC.? Indicate the amount of any income, gain, or loss. total gain recognized- $40,000 2. What is James's basis in TOBY, INC. stock? $5,000+Ş40,000= $45,000 3. Does Jenna have income, gain, or loss on the transaction in which she receives stock in TOBY, INC.? Indicate the amount of any income, gain, or loss. 4. What is Jenna's basis in TOBY, INC. stock? $20,000+ $10,000= $30,000 5. Does Ollie have income, gain, or loss on the transaction in which he receives stock in TOBY, INC.? Indicate the amount of any income, gain, or loss. 6. What is Ollie's basis in his TOBY, INC. stock? 30,000-60000+30000-0 7. What basis does TOBY, INC. have in:

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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The following three individuals decide to form TOBY, INC., a C corporation: **James:** - Receives 500 shares of stock - Services performed (developed technology platform) valued at $40,000 - Contributed computer and peripheral equipment valued at $5,000 and $10,000 **Jenna:** - Receives 500 shares of stock - Cash valued at $20,000 - Office furnishings (desk, chairs, retail fixtures) valued at $10,000 and $30,000 **Ollie:** - Receives 500 shares of stock - Land and Building valued at $30,000 and $100,000 - Mortgage on land & building (assumed by TOBY, INC.) valued at $60,000 **Questions:** 1. **Does James have income, gain, or loss on the transaction in which he receives stock in TOBY, INC.?** Indicate the amount of any income, gain, or loss. - Total gain recognized = $40,000 2. **What is James's basis in TOBY, INC. stock?** - $55,000 - $40,000 = $45,000 3. **Does Jenna have income, gain, or loss on the transaction in which she receives stock in TOBY, INC.?** Indicate the amount of any income, gain, or loss. 4. **What is Jenna’s basis in TOBY, INC. stock?** - $20,000 + $10,000 = $30,000 5. **Does Ollie have income, gain, or loss on the transaction in which he receives stock in TOBY, INC.?** Indicate the amount of any income, gain, or loss. 6. **What is Ollie’s basis in his TOBY, INC. stock?** - $30,000 - $60,000 + $30,000 = $0 7. **What basis does TOBY, INC. have in:** - The computer and peripheral equipment: $5,000 This information outlines the initial stock issuance and basis calculations for founding members of a corporation, highlighting income recognition and asset contributions.
Transcribed Image Text:The following three individuals decide to form TOBY, INC., a C corporation: **James:** - Receives 500 shares of stock - Services performed (developed technology platform) valued at $40,000 - Contributed computer and peripheral equipment valued at $5,000 and $10,000 **Jenna:** - Receives 500 shares of stock - Cash valued at $20,000 - Office furnishings (desk, chairs, retail fixtures) valued at $10,000 and $30,000 **Ollie:** - Receives 500 shares of stock - Land and Building valued at $30,000 and $100,000 - Mortgage on land & building (assumed by TOBY, INC.) valued at $60,000 **Questions:** 1. **Does James have income, gain, or loss on the transaction in which he receives stock in TOBY, INC.?** Indicate the amount of any income, gain, or loss. - Total gain recognized = $40,000 2. **What is James's basis in TOBY, INC. stock?** - $55,000 - $40,000 = $45,000 3. **Does Jenna have income, gain, or loss on the transaction in which she receives stock in TOBY, INC.?** Indicate the amount of any income, gain, or loss. 4. **What is Jenna’s basis in TOBY, INC. stock?** - $20,000 + $10,000 = $30,000 5. **Does Ollie have income, gain, or loss on the transaction in which he receives stock in TOBY, INC.?** Indicate the amount of any income, gain, or loss. 6. **What is Ollie’s basis in his TOBY, INC. stock?** - $30,000 - $60,000 + $30,000 = $0 7. **What basis does TOBY, INC. have in:** - The computer and peripheral equipment: $5,000 This information outlines the initial stock issuance and basis calculations for founding members of a corporation, highlighting income recognition and asset contributions.
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