CH.8 Q.27

Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $200,000 in return for 50 percent of the corporations stock. Hermione contributed a building and land with the following fair market values and adjusted bases in return for 50 percent of the corporations stock:

	FMV			Tax-Adjusted Basis
Building	$	112,000		$	28,000
Land		168,000			112,000
Total	$	280,000		$	140,000

To equalize the exchange, Wizard Corporation paid Hermione $80,000 in addition to her stock.

a. What amount of gain or loss does Ron realize on the formation of the corporation? What amount, if any, does he recognize? (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.)

Gain or loss realized	$
Gain or loss recognized	$

b. What is Rons tax basis in the stock he receives in return for his contribution of property to the corporation? (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.)

c. What amount of gain or loss does Hermione realize on the formation of the corporation? What amount, if any, does she recognize? (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.)

Gain or loss realized	$
Gain or loss recognized	$

d. What is Hermiones tax basis in the stock she receives in return for her contribution of property to the corporation? (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.)

e. What adjusted basis does Wizard Corporation take in the land and building received from Hermione? (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.)

	LAND	BUILDING
Adjusted basis

f. What amount of gain or loss does Hermione realize on the formation of the corporation? What amount, if any, does she recognize? Assume Hermiones adjusted basis in the land was $200,000. (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.)

Gain or loss realized	$
Gain or loss recognized	$

g. What adjusted basis does Wizard Corporation take in the land and building received from Hermione? Assume Hermiones adjusted basis in the land was $200,000. (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign)

	LAND	BUILDING
Adjusted basis

h. What amount of gain or loss does Hermione realize on the formation of the corporation? What amount, if any, does she recognize? Assume Hermiones adjusted basis in the land was $280,000. (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.)

Gain or loss realized	$
Gain or loss recognized	$

i. What adjusted basis does Wizard Corporation take in the land and building received from Hermione? Assume Hermiones adjusted basis in the land was $280,000. (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.)

	LAND	BUILDING
Adjusted basis