a. What amount of gain or loss does Zhang recognize on the transfer of the property to her corporation?b. What is Zhang’s tax basis in the stock she receives in the exchange? [The following information applies to the questions displayed below.]Zhang incorporated her sole proprietorship by transferring inventory, a building, and land to the corporation in return for100 percent of the corporation's stock. The property transferred to the corporation had the following fair market valuesand tax bases:FMVInventory $ 20,000BuildingLandTotalTaxBasis$ 10,000150,000 100,000230,00070,000$400,000 $180,000The corporation also assumed a mortgage of $200,000 attached to the building and land. The fair market value of thecorporation's stock received in the exchange was $220,000. The exchange met the requirements to be tax-deferredunder §351. (Negative amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)

The tax basis, also known as the adjusted tax basis, represents the asset's cost in terms of…

Zhang incorporated her sole proprietorship by transferring inventory, a b 100 percent of the corporation's stock. The property transferred to the c and tax bases: Tax Basis FMV Inventory $ 20,000 $ 10,000 Building 150 000 100 000

Zhang incorporated her sole proprietorship by transferring inventory, a b 100 percent of the corporation's stock. The property transferred to the c and tax bases: Tax Basis FMV Inventory $ 20,000 $ 10,000 Building 150 000 100 000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

a. What amount of gain or loss does Zhang recognize on the transfer of the property to her corporation?

b. What is Zhang’s tax basis in the stock she receives in the exchange?

[The following information applies to the questions displayed below.]
Zhang incorporated her sole proprietorship by transferring inventory, a building, and land to the corporation in return for
100 percent of the corporation's stock. The property transferred to the corporation had the following fair market values
and tax bases:
FMV
Inventory $ 20,000
Building
Land
Total
Tax
Basis
$ 10,000
150,000 100,000
230,000
70,000
$400,000 $180,000
The corporation also assumed a mortgage of $200,000 attached to the building and land. The fair market value of the
corporation's stock received in the exchange was $220,000. The exchange met the requirements to be tax-deferred
under §351. (Negative amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)

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