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

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Ramona and Hermione formed Wiley Corporation on January 2. Ramona contributed cash of $305,000 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
$ 114,375
266,875
$ 381,250
Adjusted Tax
Basis
$ 30,500
122,000
$ 152,500
To equalize the exchange, Wiley Corporation paid Hermione $76,250 in addition to her stock.
Required:
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.
Transcribed Image Text:Ramona and Hermione formed Wiley Corporation on January 2. Ramona contributed cash of $305,000 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 $ 114,375 266,875 $ 381,250 Adjusted Tax Basis $ 30,500 122,000 $ 152,500 To equalize the exchange, Wiley Corporation paid Hermione $76,250 in addition to her stock. Required: 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.
i. Assume Hermione's adjusted tax basis in the land was $381,250.
What adjusted tax basis does Wiley Corporation take in the land and building received from Hermione?
Note: Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.
j. Assume Hermione's adjusted tax basis in the land was $381,250.
What election can Hermione and Wiley Corporation make to allow Wiley Corporation to take a carryover basis in the land?
Transcribed Image Text:i. Assume Hermione's adjusted tax basis in the land was $381,250. What adjusted tax basis does Wiley Corporation take in the land and building received from Hermione? Note: Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign. j. Assume Hermione's adjusted tax basis in the land was $381,250. What election can Hermione and Wiley Corporation make to allow Wiley Corporation to take a carryover basis in the land?
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