Question

Jay owns 80% of Crystal Corporation stock. He transfers a business automobile to Crystal in exchange for additional Crystal stock worth $12,000 and Crystal's assumption of both his $2,500 automobile debt and his $5,500 education loan. The automobile originally cost Jay $22,000 and, on the transfer date, has a $10,500 adjusted basis and a $20,000 FMV. Read the requirements. Requirement a. What are the amount and character of Jay's recognized gain or loss? Jay realizes a C D and recognizes a D O This is treated as Requirement b. What is Jay's basis in his additional Crystal shares? Jay's basis in the stock is Requirement c. When does Jay's holding period for the additional shares begin? Jay's holding period for the additional shares Requirement d. What basis does Crystal take in the automobile?

Answer 1

Refer a below image, for the above asked questions , in a detailed way of solution.

Solution: a) What are the amount is character of Jay's recognized gain cor) loss a $8000 of ordinary income jay realizes a $9500 { [s 12000 + $ 2500 + $ 5500] ~$ 10500l, gain and recognizes a $8000 gain. Because the $5500 education toan assumed by crystal corporation has no apparent business purpose, all liabilities transiferred t All are of treated Jay's de as cor boot ararh. under sec 35766). gain is ordinary income recaptured under sec 1245- what is $ 10500 Jay's basis in his crystal Shares ? Jay's basis in his Stock is $ 10500 (ie, & 10500 + $ 8000 & 8000). period for the additional includes c) when does Jay's holding shares begin ? Jay's holding period for his holding period for the the additional Shares automobile. d) what bass does crystal tare in the automobite ? & 18500 crystal basis in the automobile is & 18500 (il & 10500 + $8000).