Kobe transfers $500,000 in cash to newly formed Bryant Corporation for 100% of Bryants stock. In the

Question:

Kobe transfers $500,000 in cash to newly formed Bryant for 100% of Bryant’s stock. In the first year of operations, Bryant’s taxable income before any payments to Kobe is $120,000. What total amount of taxable income must Kobe and Bryant each report in the following two scenarios?
a. Bryant pays a $70,000 to Kobe.
b. Assume that when Bryant was formed, Kobe transferred his $500,000 to the for $250,000 of Bryant stock and $250,000 in Bryant notes. The notes are repayable in five annual installments of $50,000 plus 8% annual interest on the unpaid balance. During the current year, Bryant gives Kobe $50,000 in repayment of the first note plus $20,000 interest.
Corporation
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