Ramona and Hermione formed Wiley Corporation on January 2. Ramona contributed cash of $220,000 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: Building Land Total FMV $ 82,500 192,500 $ 275,000 Adjusted Tax Basis $ 22,000 88,000 $ 110,000 To equalize the exchange, Wiley Corporation paid Hermione $55,000 in addition to her stock.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Ramona and Hermione formed Wiley Corporation on January 2. Ramona contributed cash of $220,000 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:
Building
Land
Total
FMV
$ 82,500
192,500
$ 275,000
Adjusted Tax
Basis
$ 22,000
88,000
$ 110,000
To equalize the exchange, Wiley Corporation paid Hermione $55,000 in addition to her stock.
h. Assume Hermione's adjusted tax basis in the land was $275,000.
What amount of gain or loss does Hermione realize on the formation of the corporation? What amount, if any, does she recognize?
Note: Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.
Gain or loss realized
Gain or loss recognized
X Answer is not complete.
$
(22,000)
Transcribed Image Text:Required information [The following information applies to the questions displayed below.] Ramona and Hermione formed Wiley Corporation on January 2. Ramona contributed cash of $220,000 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: Building Land Total FMV $ 82,500 192,500 $ 275,000 Adjusted Tax Basis $ 22,000 88,000 $ 110,000 To equalize the exchange, Wiley Corporation paid Hermione $55,000 in addition to her stock. h. Assume Hermione's adjusted tax basis in the land was $275,000. What amount of gain or loss does Hermione realize on the formation of the corporation? What amount, if any, does she recognize? Note: Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign. Gain or loss realized Gain or loss recognized X Answer is not complete. $ (22,000)
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