Tom incorporates his sole proprietorship as Total Corporation and transfers its assets - 23339

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SuperPower

SuperPower

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Request Description

Tom incorporates his sole proprietorship as Total Corporation and transfers its assets to Total in exchange for all 100 shares of Total stock and four $10,000 interest-bearing notes.  The stock has a $125,000 FMV. The notes mature consecutively on the first four anniversaries of the incorporation date. The assets transferred are as follows:

                             Assets                                                                   Adjusted Basis                                  FMV

Cash                                                                                                   $5,000                                                   $5,000

Equipment                                                       $130,000

Minus: Accumulated depreciation         (70,000)              60,000                                              90,000

Building                                                       $100,000

Minus: Accumulated depreciation          (49,000)             51,000                                              40,000

Land                                                                                                   24,000                                                   30,000

             Total                                                                                      $140,000                                              $165,000

 

Requirements:

a. What are the amounts and character of Tom’s recognized gains or losses?

b. What is Tom’s basis in the Total stock and notes?

c. What is Total’s basis in the property received from Tom?

Solution Description

Previously, thank you for purchasing my tutorial. I try to

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