On January 7, 2022, Martin Corporation acquires two properties from a shareholder solely in exchange for stock in a transaction that qualifies under § 351. The shareholder's basis, the fair market value, and the built-in gain (loss) of each property are: Shareholder's Fair Market Built in Gain Basis Value or (Loss) Property 1 $471,800 $566,160 $94,360 Property 2 $802,060 $613,340 ($188,720) Net built-in loss ($94,360) Martin adopts a plan of liquidation later in the year and distributes Property 2 to a 45% shareholder when the property is worth $518,980. a. Compute Martin's basis in Property 1 and in Property 2 as of January 7, 2022. Martin's basis is Property 1 is a Martin's basis in Property 2 is a basis of $ basis of $ b. Compute Martin's realized and recognized loss on the liquidating distribution of Property 2. Martin has a realized loss of $ and a recognized loss of $

On January 7, 2022, Martin Corporation acquires two properties from a shareholder solely in exchange for stock in a transaction that qualifies under § 351. The shareholder's basis, the fair market value, and the built-in gain (loss) of each property are: Shareholder's Fair Market Built in Gain Basis Value or (Loss) Property 1 $471,800 $566,160 $94,360 Property 2 $802,060 $613,340 ($188,720) Net built-in loss ($94,360) Martin adopts a plan of liquidation later in the year and distributes Property 2 to a 45% shareholder when the property is worth $518,980. a. Compute Martin's basis in Property 1 and in Property 2 as of January 7, 2022. Martin's basis is Property 1 is a Martin's basis in Property 2 is a basis of $ basis of $ b. Compute Martin's realized and recognized loss on the liquidating distribution of Property 2. Martin has a realized loss of $ and a recognized loss of $

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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Exercise 20-18 (Algorithmic) (LO. 1) On January 7, 2022, Martin Corporation acquires two properties from a shareholder solely in exchange for stock in a transaction that qualifies under § 351. The shareholder's basis, the fair market value, and the built-in gain (loss) of each property are: Property 1 Property 2 Net built-in loss Shareholder's Fair Market Built in Gain Basis Value or (Loss) $439,440 $476,060 $366,200 $622,540 $73,240 ($146,480) ($73,240) Martin adopts a plan of liquidation later in the year and distributes Property 2 to a 20% shareholder when the property is worth $402,820. a. Compute Martin's basis in Property 1 and in Property 2 as of January 7, 2022. 125,000 x. Martin's basis is Property 1 is a carryover Martin's basis in Property 2 is a stepped-down ✔ basis of $ ✔basis of $ 3,233,223 X. b. Compute Martin's realized and recognized loss on the liquidating distribution of Property 2. 2,324,232 X. 23,324 X and a recognized loss of $ Martin has a realized loss of $
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 bases: FMV Adjusted Basis Inventory $ 15,750 $ 9,500 Building 71,500 54,750 Land 195,000 72,500 Total $ 282,250 $ 136,750 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. 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 he receives in his corporation?
Padre, Incorporated, buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2024, for $791,520 cash. At the acquisition date, Sierra's total fair value, including the noncontrolling interest, was assessed at $989,400, although Sierra's book value was only $638,000. Also, several individual items on Sierra's financial records had fair values that differed from their book values as follows: Account Land Buildings and equipment (10-year remaining life) Copyright (20-year remaining life) Notes payable (due in 8 years) Book Value $ 65,200 295,000 Fair Value $ 307,200 276,000 104,000 (187,000) 218,000 (172,600) For internal reporting purposes, Padre, Incorporated, employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2024, for both companies. Account Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity in income of Sierra Net income Retained earnings,…
(3) ABC Corporation distributes a building to Green, an individual and fifty (50) percent shareholder. The building has a FMV of $50,000 and an adjusted basis of $32,000. The building was encumbered by a $20,000 liability at the time of its distribution to Green. Without considering the distribution of the building to Green, ABC Corporation had earnings and profits of $26,500. Green adjusted basis in his interest in ABC Corporation was equal to $15,000. (a) What is the amount of the section 301 distribution to Green? (b) What is Green's basis in the building following its distribution to Green? (c) What is the amount of gain recognized by ABC Corporation as a result of the distribution of the building to Green? (d) What is the character of the distribution to Green and what is the amount of ABC's earnings and profits following the distribution?
Q.2. In a complete liquidation, Corporation Z distributes a building with adjusted tax basis of $200,000 and fair market value of $300,000 to its shareholder, Z. The shareholder assumes the liability on the building equal to $325,000. Z has basis in their stock of $50,000. Immediately after this transaction, what is the shareholder’s basis in the building? 275,000 200,000 325,000 300,000
Subject : Accounting
3
On the effective date of the Bravo Corporation's (the Company) S Corporation election (January 1, 2020) the Company had a built in gain with respect to certain real estate held by the Corporation on that date of $100,000. The Company had zero basis in the real estate and it was appraised for $100,000. One year later (January 1, 2021) this built in gain was realized when the Company sold the real estate to an unrelated party $100,000 and there were no expenses associated with the sale. For the Company's calendar year 2021, the Company has, exclusive of this gain, taxable income of $2,000,000. Required: 1. Calculate the built-in gains tax (Federal) that will be paid by Bravo Corporation with its 2021 tax return as a result of the sale of this real estate. 2. Calculate the amount of gain that will be passed through to the Company's shareholders related to this sale.
Leah transfers equipment (basis of $400,000 and fair market value of $500,000) for additional stock in Crow Corporation. After the transfer, Leah owns 80% of Crow's stock. Associated with the equipment is Section 1245 depreciation recapture potential of $70,000. As a result of the transfer, Leah recognizes ordinary income of $70,000. the Section 1245 depreciation recapture potential carries over to Crow Corporation. the Section 1245 depreciation recapture potential disappears. Leah recognizes ordinary income of $70,000 and 1231 gain of $30,000. None of the above
Gg.115.
Urmila ben
Pearl acquires 90% of the voting stock of Spruce on January 1, 2020 for $5,000. The fair value of the noncontrolling interest is $550. Spruce's equity is reported at $4,800 at the date of acquisition. Its net assets are reported at amounts approximating fair value, but it has previously unreported identifiable intangible assets (5-year life, straight-line), valued at $1,000. Pearl uses the complete equity method to account for its investment. Spruce reports net income of $300 for 2020. On the 2020 consolidation working paper, what is the credit to noncontrolling interest in eliminating entry (R)? A. B. C. D. $80 $65 $85 $70