Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $180,000 in return for 50 percent of the corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted bases in return for 50 percent of the corporation's stock: Building Land Total FMV $104,000 156,000 $260,000 Tax- Adjusted Basis $ 26,000 104,000 $130,000 To equalize the exchange, Wizard Corporation paid Hermione $80,000 in addition to her stock.
Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $180,000 in return for 50 percent of the corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted bases in return for 50 percent of the corporation's stock: Building Land Total FMV $104,000 156,000 $260,000 Tax- Adjusted Basis $ 26,000 104,000 $130,000 To equalize the exchange, Wizard Corporation paid Hermione $80,000 in addition to her stock.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Done
Transcribed Image Text:Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $180,000 in return for 50 percent of
the corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted bases
in return for 50 percent of the corporation's stock:
Building
Land
Total
FMV
$104,000
156,000
$260,000
Tax-
Adjusted
Basis
$ 26,000
104,000
$130,000
To equalize the exchange, Wizard Corporation paid Hermione $80,000 in addition to her stock.
Assume Hermione's adjusted basis in the land was $180,000.
f. What amount of gain or loss does Hermione realize on the formation of the corporation? What amount, if any, does she recognize?
(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
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education