Question

Bruce Banner and Natasha Romanoff form Sakaar Corporation with the following investments. Bruce transfers equipment (basis of $60,000 and fair market value of $150,000), while Natasha transfers land (basis of $25,000 and fair market value of $120,000) and services rendered (worth $30,000) in organizing the corporation. Each is issued 25 shares in Sakaar Corporation.

1. What amount of gain or loss will Bruce realize and recognize on the transaction and what is his basis in the stock received?

2. 1. What are the tax effects to Sakaar Corporation and what is Sakaar’s basis in each asset transferred?  

Answer 1

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Answer are highlighted in yellow: Solution: As section 351 is applicable here and business debt is less than the tax basis, therefore, NO gain or loss will be recognized. For 100% stock: Bruce tax basis $-60,000 FMV of Stock received 150000 Mortgage/Liability assmued 1)a Realized Gain 90,000 1)b Recognized gain $ per section 351 No gain or loss will be recognized as section 351 is applicable $ Tax effects to Sakaar Corporation 2)a 2)b Corporate basis in asset: (Carryover basis of shareholder any gain recongized) 60,000 Equipment $25,000 ii) Land 30,000 Service rendered (Fair market value)