Question

- 2. On June 30, 2019. Kyungwe June 30, 2019, Kyungwha transfers the following assets to a corporation (Gomop Inc.- Computer (Tax Basis to Kyungwha richt before the transfer $25.000 Fair Market Value of Construction Equipment Tax Basis to Kyungwha right before the transfer: $16,000; Fair ma transfer: $25,000; Fair Market Value of $75,000) Cash (Tax Basis to Kyungwha right before the transfer: $20.000: Fair Market Value of $20,000) clore the transfer: $16,000; Fair Market Value of $93,000) m return she receives 78% of the shares (both voting power and number of shares) of Gomop Inc. IOCK. The fair market value of the Gomop Corporation stock received was $188,000 and Kyungwha did not own any w Gomop Inc, before the transaction above took place. What is Kyungwha's (1) recognized gain or loss and (2) her tax basis in the Gomop Inc. stock based on to wove transaction? a. $50,000 loss; $188,000 stock basis b. $76,000 gain; $41,000 stock basis c. $147,000 gain; $188,000 stock basis d. $127,000 gain; $188,000 stock basis e. None of the above

Answer 1

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Answer is highlighted in yellow: Solution: Answer: Explanation: d. $127,000 gain; $188,000 stock basis In this case section 351 is not applicable, because ownership is less than 80%. Therefore, gain or loss will be recognized on contribution as below: 1) Fair value of stock received 188000 Less: Adjusted basis (25000+16000+20000) 61000 Recognized gain 127000 Stock basis in Gomop Inc 2) (Adjusted basis) + (Gain recognized) Stock basis in Gomop Inc = (61000+127000)= 188000