Question

! Required information [The following information applies to the questions displayed below.) Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $200,000 in return for 50 percent of the corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted bases in return for 50 percent of the corporation's stock: Building Land Total THV $112,000 168,000 $280,000 Tax- Adjusted Basis $ 28,000 112,000 $140,000 To equalize the exchange. Wizard Corporation paid Hermione $80,000 in addition to her stock. a. What amount of gain or loss does Ron realize on the formation of the corporation? What amount, if any, does he recognize? (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) Gain or loss realized Gain or loss recognized

Answer 1

80000 f) Assum e Hermoine's Adjusted basis on land was $200000 then Gain ex) loss Recognised and realised ?- fair Market value of stock Received = 20000 O Addi Cash Received Amoant Realized 280,000 tess: Adjusted Tax Bais of Assets transfer (228000) (200,000 + 28000 Gain Real Realized Cash Received is allocated to the Assets based on fmy: Buildings - 52000 +12000 X80000 32000 280000 Land - 48000 = 168000 X80000 280000 Hence, heimoine Recognized agair of $32000 on contribution of building which is less than gain realized land Adjusted Basis of $76000 (48000 +-28000 on