Question

Carl transfers land to Cardinal Corporation for 90% of the stock in Cardinal Corporation worth $20,000 plus a note payable to Carl in the amount of $40,000 and the assumption by Cardinal Corporation of a mortgage on the land in the amount of $100,000. The land, which has a basis to Carl of $70,000, is worth $160,000. a. Cardinal Corporation will have a basis of $160,000 in the land transferred by Carl. Ob. Carl will have a recognized gain on the transfer of $30,000 c. Carl will have a recognized gain on the transfer of $90,000. Od. Cardinal Corporation will have a basis of $70,000 in the land transferred by Carl. e. None of these choices are correct.

Answer 1

Under $ 35 does not qu Ans(e) None of the these choices are correct. e mortage on the land exceeds Carl's basis in the and by $30,000. This amount would be recognized gain er $ 357(c). In addition, the note payable to cart • not qualify for nonrecognition under $ 351, thus il would have additional gain of $40,000. Amount realized: stock $ 20,000 Note 40,000 Release of mortgage 100,000 $ 160,000 Less: Basis of Land (70,000) Realized gain $90,000 Recognized gain ($30,000 $70,000 V + $40,000) Cardinal Corporation will have a basis of $140,000 in the land $70,000 (carl's basis of the land) + $70,000 (gain recognized by carl with respect to the transfer of land) ]