Question

Jordan owns 80% of Ruby Corporation stock. He transfers a business automobile to Ruby in exchange for additional Ruby stock worth $12,000 and Ruby's assumption of both his $3,500 automobile debt and his $1,500 education loan. The automobile originally cost Jordan $22,000 and, on the transfer date, has a $7,500 adjusted basis and a $17,000 FMV Read the requirements. Requirement a. What are the amount and character of Jordan's recognized gain or loss? Jordan realizes a D and recognizes a D D This is treated as C Requirement b. What is Jordan's basis in his additional Ruby shares? Jordan's basis in the stock is Requirement c. When does Jordan's holding period for the additional shares begin? Jordan's holding period for the additional shares Requirement d. What basis does Ruby take in the automobile? Ruby corporation's basis in the automobile is

Answer 1

Shareholder do not recognize gain or loss on the transfer of assets to a corporation in exchange for stock as long as three requirement are satisfied. First, the shareholder must bansfer property to the corporation in exchange for stock. The term "property" includes cash & real of intangible property . but not seruices. Secondly, immediately after the transfer, the bansferor together with all the other persons who also bansfered property as a past of same bansaction are in control" of the corporation Control" means the ownership of 80% of the voting power of the voting stock of the corporation

Subject -- Date the bansaction includes reciept of boot........ ...you...need to... Decognise...gainos. loss..oh. Dansaction.................... Sf. as...part of a transaction described the pansferle corporation assumes....on takes propesty subject to liabilities of the transferor the liabilities are ordinarily not făcated as taxable boot. pectieved by the shareholder but are treated as boot... in determining basis.......... I Jordan realises $9500 gain & recognises a $ 0 gain. This is treated as non taxable Jordan basis in the stock is $2500 { $.7500.-. $.3500 - $.150). Jordan's holding shares is the asset. period Lolding for the additonal period of Dansfered Ruby corporation basis in the automobile is ... $750 O Corporation basis is same as shareholdee's.. adjusted bases plus any garis Decognued....