Question

Ben and Jerry decide to incorporate their ice cream business. Allie would also like to be a shareholder in the business. As such, Ben and Allie agree that immediately after the incorporation of the company and the issuance of stock, Ben will sell Allie half of his shares in the company. Ben contributes inventory (FMV $60,000, Basis $30,000), and accounts receivable (FMV $40,000, Basis $40,000) to the corporation for 50% of the stock, and Jerry contributes equipment (FMV $60,000, Basis $80,000) for the other 50% of the stock. What gain or loss does Ben and Jerry recognize in the transfer. A. Ben: S30,000 loss; Jerry: $20,000 gain B. No Gain or Loss is Recognized since the transaction qualifies under $351 C. Ben recognizes a $30,000 gain but Jerry receives non- recognition treatment on the transfer D. Ben: $30,000 gain; Jerry: $20,000 gain E. None of these. Jack contributes the following to ABC corporation in a $351 exchange: (1) real property with a basis of 400,000 and a fair market value of $800,000, with a $200,000 mortgage attached to it and (2) a personal loan for $20,000. How much income does Jack recognize on the transaction? A. $0 B. $20,000 C. $220,000 D. $400,000 Harry and Zelda incorporate their business. Harry contributes three properties: (1) machinery with basis of $50,000 and FMV of $40,000; (2) real estate with basis of $100,000 and FMV of $2 million and (3) cash of $50,000. Zelda contributes land worth $10 million, basis $1 million. The land Zelda contributes was purchased using a mortgage. The principal balance on the mortgage is $800,000. What is Harry and Zelda's basis in the company? A. Harry: 2,090,000; Zelda: 10 million B. Harry: 2,090,000; Zelda: 0 C. Harry: 200,000; Zelda: 0 D. Harry: 200,000; Zelda: 1 million E. Harry: 200,000; Zelda: 9 million F. Harry: 200,000; Zelda: 200,000

Answer 1

The negotiation between Ben and Jerry is Ben will transfer inventory and AR worth $100000 on Fair Market Value basis. Jerry contributes equipment worth $60000 on Fair Market Value basis and $80000 on cost basis. On fair market value, the total contribution is $160000 and Jerry wants his 50% share at $80000 basis of equipment transferred. The answer is B.

$0 under 351 exchange. The answer is A.

The basis in the company is calculated on fair market value basis. Hence the answer is A.

True. 2018 loss can be taken in 2018 tax return.

False. All formalities of incorporation should be election efficient. Business should be run election efficient from September 7, 2019.

False. The transactions are 351 exchange and so no loss or gain can be recognised.

Last question is incomplete.