Dan, a cash basis taxpayer, incorporates his sole proprietorship. He transfers the following items to newly...
Dan, a cash basis taxpayer, incorporates his sole proprietorship. He transfers the following items to newly created Orange Corporation.
Adjusted Basis Fair Market Value: Cash $ 10,000 $ 10,000 Building 120,000 175,000 Mortgage payable (secured by the building and held for 15 years) 135,000 135,000 With respect to this transaction:
a. Orange Corporation’s basis in the building is $120,000.
b. Dan has no recognized gain.
c. Dan has a recognized gain of $5,000.
d. Dan has a recognized gain of $10,000.
e. None of the above.
Homework Answers
c. Dan has a recognized gain of $5,000.
Under section 357(c), Dan recognizes gain to the extent liabilities (mortgage payable of $135,000) exceed the basis of all assets transferred [$120,000 (building) + $10,000 (cash).
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Dan, a cash basis taxpayer, incorporates his sole
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Don, a cash basis taxpayer, incorporates his sole proprietorship. He transfers the following items to newly...
Don, a cash basis taxpayer, incorporates his sole proprietorship. He transfers the following items to newly created Orange Corporation. Fair Market Value $ 10,000 175,000 135,000 Adiusted Basis $10,000 120,000 135,000 Cash Building Mortgage payable (secured by the building and held for 15 years) With respect to this transaction: a. Orange Corporation's basis in the building is $120,000. b. Don has a recognized gain of $5,000. e. Don has a recognized gain of $10,000. d. Don has no recognized gain.
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