Question

Jack and Dan agree to go into business together selling clothing. According to the agreement, Jack will contribute inventory valued at $91,200 in return for 80 percent of the stock in the corporation. Jack’s tax basis in the inventory is $50,160. Dan will receive 20 percent of the stock in return for providing accounting services to the corporation (these qualified as organizational expenditures). The accounting services are valued at $22,800. (Negative amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.) (US tax law)

Assume Dan received 25 percent of the stock in the corporation in return for his services.

g. What amount of income gain or loss does Dan recognize on the formation of the corporation?

income, gain or loss recognized =

h. What is Dan’s tax basis in the stock he receives in return for his contribution of services to the corporation?

tax basis =

Answer 1

Unit selling price	$          400.00
Less: Unit Variable cost	$        (240.00)
Unit Contribution Margin	$    160.00
Carla Vista Company'
CVP income statement
For the Month ended Sept 30,2020
	Total	Per Unit
Sales	$ 2,40,000.00	$ 400.00
Variable Costs	$ 1,44,000.00	$ 240.00
Contribution margin	$     96,000.00	$ 160.00
Fixed Costs	$     54,400.00
Net income	$     41,600.00
break even point in units : Fixed cost / Contribution margin per unit
54400 / 160	340	Units
Carla Vista Company'
CVP income statement
For the Month ended Sept 30,2020
	Total	Per Unit
Sales	$ 1,36,000.00	$ 400.00
Variable Costs	$     81,600.00	$ 240.00
Contribution margin	$     54,400.00	$ 160.00
Fixed Costs	$     54,400.00
Net income	$                   -