Corporate Formations Problem

Mary and Todd form the MT Corporation, with a transfer of the following properties:

Mary $3,000,000 cash

Todd $3,000,000 FMV property

$2,300,000 tax basis

Both Mary and Todd receive a 50% interest in the corporate stock.

Complete the following

Mary Todd

Realized gain ________ ________

Recognized gain ________ _________

Basis of Stock _________ _________

MT basis in contributed asset __________ _________

VARIATION 1: In addition to Mary and Todd, Karla joins the corporation at its inception. Karla will provide services to the corporation in exchange for a 22% interest in the stock. That is, she receives 22% of the outstanding shares. Does anything change? Why or why not? CHECK THE BOOK AS A SOURCE

VARIATION 2: return to original facts (no Karla). Todds property is valued at $3,800,000 but is contributed subject to a $800,000 liability.

Complete the following

Mary Todd

Realized gain ________ ________

Recognized gain ________ _________

Basis of stock _________ _________

MT basis in contributed asset __________ _________