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Tom and Grace are the sole owners of Super Corporation. Tom owns 40% of the stock...

Tom and Grace are the sole owners of Super Corporation. Tom owns 40% of the stock and Grace owns 60%. Several years after the creation of the corporation, Tom contributes an additional $40,000 in cash and Grace contributes additional property with a fair market value of $60,000 and an adjusted basis of $50,000.

What amount of income is recognized by Super Corporation as a result of these contributions?

  • $90,000

  • Unselected

    $10,000

  • $50,000

  • $0

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Answer #1

Super Corporation will not recognize any income as a result of these contributions .

Reason - This consideration will be excess consideration for the stock held by Tom and Grace. No contribution to be recognized as Tom and grace contribution ratio is pproportionately divided towards stock.

Therefore, the correct answer is option 4th, $0.

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