Barbara transfers $10,000 cash and machinery having a $15,000 basis and a $35,000 FMV to Moore Corporation in exchange for 50 shares of Moore stock. The machinery was used in Barbara’s business, originally cost Barbara $50,000, and is subject to a $28,000 liability, which Moore assumes. Sam exchanges $17,000 cash for the remaining 50 shares of Moore stock.
a. What are the amount and character of Barbara’s recognized gain or loss?
b. What is Barbara’s basis in the Moore stock?
c. What is Moore’s basis in the machinery?
d. What are the amount and character of Sam’s recognized gain or loss?
e. What is Sam’s basis in the Moore stock?
f. When do Barbara and Sam’s holding periods for their stock begin?
g. How would your answers to Parts A through F change if Sam received $17,000 of Moore stock for legal services (instead of cash)?
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