On the formation of X Corp, Moustapha transfers land with a basis of $40,000 and a FMV of $60,000 in exchange for 60 shares (60%) of common stock of X Corp, and Ava transfers equipment with a basis of $40,000 and a FMV of $10,000 in exchange for 40 shares (40%). Two months later, pursuant to a prearranged binding agreement, Ava sells all her X Corp stock to Rose for $40,000 cash. What are the tax consequences to Moustapha and Ava of the transfers to X Corp? O $20,000 gain to Moustapha; no gain/loss to Ava O $20,000 gain to Moustapha; $30,000 loss to Ava O No gain/loss to either O No gain/loss to Moustapha; $30,000 loss to Ava
On the formation of X Corp, Moustapha transfers land with a basis of $40,000 and a FMV of $60,000 in exchange for 60 shares (60%) of common stock of X Corp, and Ava transfers equipment with a basis of $40,000 and a FMV of $10,000 in exchange for 40 shares (40%). Two months later, pursuant to a prearranged binding agreement, Ava sells all her X Corp stock to Rose for $40,000 cash. What are the tax consequences to Moustapha and Ava of the transfers to X Corp? O $20,000 gain to Moustapha; no gain/loss to Ava O $20,000 gain to Moustapha; $30,000 loss to Ava O No gain/loss to either O No gain/loss to Moustapha; $30,000 loss to Ava
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![On the formation of X Corp, Moustapha transfers land with a basis of $40,000 and a FMV of $60,000 in exchange for 60
shares (60%) of common stock of X Corp, and Ava transfers equipment with a basis of $40,000 and a FMV of $10,000 in
exchange for 40 shares (40%). Two months later, pursuant to a prearranged binding agreement, Ava sells all her X Corp stock
to Rose for $40,000 cash. What are the tax consequences to Moustapha and Ava of the transfers to X Corp?
O $20,000 gain to Moustapha; no gain/loss to Ava
O $20,000 gain to Moustapha; $30,000 loss to Ava
O No gain/loss to either
O No gain/loss to Moustapha; $30,000 loss to Ava](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3ee33aed-9a5b-4509-b2d5-e889c7446511%2Ff8893055-3424-4c73-be58-d5181c8252d6%2Fkknk4mv_processed.jpeg&w=3840&q=75)
Transcribed Image Text:On the formation of X Corp, Moustapha transfers land with a basis of $40,000 and a FMV of $60,000 in exchange for 60
shares (60%) of common stock of X Corp, and Ava transfers equipment with a basis of $40,000 and a FMV of $10,000 in
exchange for 40 shares (40%). Two months later, pursuant to a prearranged binding agreement, Ava sells all her X Corp stock
to Rose for $40,000 cash. What are the tax consequences to Moustapha and Ava of the transfers to X Corp?
O $20,000 gain to Moustapha; no gain/loss to Ava
O $20,000 gain to Moustapha; $30,000 loss to Ava
O No gain/loss to either
O No gain/loss to Moustapha; $30,000 loss to Ava
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