Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $260,000 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: (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) FMV Adjusted Tax Basis Building $ 97,500 $ 26,000 Land 227,500 104,000 Total $ 325,000 $ 130,000 To equalize the exchange, Wizard Corporation paid Hermione $65,000 in addition to her stock. Assume Hermione’s adjusted tax basis in the land was $325,000.
Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $260,000 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: (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.)
| FMV | Adjusted Tax Basis | |
|---|---|---|
| Building | $ 97,500 | $ 26,000 |
| Land | 227,500 | 104,000 |
| Total | $ 325,000 | $ 130,000 |
To equalize the exchange, Wizard Corporation paid Hermione $65,000 in addition to her stock.
Assume Hermione’s adjusted tax basis in the land was $325,000.
What amount of gain or loss does Hermione realize on the formation of the corporation? What amount, if any, does she recognize?
Gain or loss realized: $
Gain or loss recognized: $
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