Ramona and Hermione formed Wiley Corporation on January 2. Ramona contributed cash of $200,000 in return for 50 percent of the corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted tax bases in return for 50 percent of the corporation's stock: FMV Adjusted Tax Basis Building $ 75,000 $ 20,000 Land 175,000 80,000 Total $ 250,000 $ 100,000 To equalize the exchange, Wiley Corporation paid Hermione $50,000 in addition to her stock. What amount of gain or loss does Hermione realize on the formation of the corporation? What amount, if any, does she recognize?
Ramona and Hermione formed Wiley Corporation on January 2. Ramona contributed cash of $200,000 in return for 50 percent of the corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted tax bases in return for 50 percent of the corporation's stock: FMV Adjusted Tax Basis Building $ 75,000 $ 20,000 Land 175,000 80,000 Total $ 250,000 $ 100,000 To equalize the exchange, Wiley Corporation paid Hermione $50,000 in addition to her stock. What amount of gain or loss does Hermione realize on the formation of the corporation? What amount, if any, does she recognize?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Ramona and Hermione formed Wiley Corporation on January 2. Ramona contributed cash of $200,000 in return for 50 percent of the corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted tax bases in return for 50 percent of the corporation's stock:
| FMV | Adjusted Tax Basis | |
|---|---|---|
| Building | $ 75,000 | $ 20,000 |
| Land | 175,000 | 80,000 |
| Total | $ 250,000 | $ 100,000 |
To equalize the exchange, Wiley Corporation paid Hermione $50,000 in addition to her stock. What amount of gain or loss does Hermione realize on the formation of the corporation? What amount, if any, does she recognize?
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