ln October 2010, Jose acquired 100% of Acorn Corporation common stock by transferring property with an adjusted

Question:

ln October 2010, Jose acquired 100% of Acorn Corporation common stock by transferring property with an adjusted basis of $1,000,000 and fair market value of $4,000,000. Acorn is a qualified small business corporation. On April 1, 2019, Jose sells all of the Acorn Corporation common stock for $16,000,000.

a. What is the amount of gain that may be excluded from Jose's gross income?

b. What would your answer be if the fair market value of the Acorn stock were only $800,000 upon its issue?

c. What would your answer be if the stock were sold after two years?

d. Can Jose avoid recognizing gain by purchasing replacement stock?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...

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