Taxation
Jeffrey Wingate and Jill Gifford have agreed to form FreshNow, Inc., an organic wholesale food distributor. Mr. Wingate transfers $900,000 in cash and services valued at $100,000 in exchange for 10% of FreshNow, Inc. common stock valued at $1 million.
Ms. Gifford will transfer the following assets and liabilities in exchange for 40% of the common stock of FreshNow, Inc., valued at $4 million
Basis | Fair Market Value | |
Assets | ||
Warehouse | $5 million | $6 million |
Land | 2 million | 3 million |
Equipment | 0 million | 1 million |
Total Assets | $7 million | $10 million |
Liabilities | $6 million |
Also, Whole Foods, Inc. has agreed to contribute $8 million in cash in exchange for 50% of the common stock valued at $5 million and a note of $3 million issued by FreshNow, Inc.
The transaction qualifies as an exchange governed by section 351(a).
State the total basis Jeffrey Wingate obtains in all the FreshNow, Inc. stock he receives.
State the total basis Ms. Gifford obtains in all the FreshNow, Inc. stock she receives.
State the total basis that FreshNow, Inc. obtains in the assets received from Ms. Gifford.
State the taxable income that Whole Foods, Inc. recognizes for its receipt of the note issued by FreshNow, Inc.
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