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QUESTION 1 Five individuals, A, B, C, D and E formed X Co. After making the following transfers to X Co. they own 100% of X Co: A $18,000 cash and $2,000 worth of services B Property: FMV $60,000 BASIS $ 60,000 MORTGAGE $20,000 C Property: FMV $32.000 BASIS $10,000 MORTGAGE $12.000 D Property FMV $20,000 BASIS $40,000 E Property FMV $92,000 (capital asset) BASIS $10,000 MORTGAGE $ 2,000 (Depreciation recapture potential of $14,000) In return, they receive the following from X Co: A $20,000 Stock B $26,000 Stock $14,000 Cash C $20,000 Stock D $18,000 Stock +$2,000 Cash E $60,000 Stock+$30,000 Cash

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Answer #1

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C's Recognised gain is $10,000

C's basis in the X Co. stock is $10,000

X's Company basis in the property received from C is $10,000

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