Corporate Formations Problem

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

Mary $2,300,000 cash

Todd $2,300,000 FMV property

$1,600,000 tax basis

Mary will receive 50% and Todd 50% of the corporate stock.

Complete the following

Mary Todd

Realized gain ________ ________

Recognized gain ________ _________

Basis of Stock _________ _________

MT basis in contributed asset __________ _________

VARIATION 1: Return to original facts (same basis). Todds property is valued at $3,300,000 but is contributed subject to a $700,000 liability. (This means that Todd still contributes equity of $2,600,000 so it is still a 50/50 split of ownership.

Complete the following

Mary Todd

Realized gain ________ ________

Recognized gain ________ _________

Basis of stock _________ _________

MT basis in contributed asset __________ _________

VARIATION 2: Same as Variation 1 (same basis) except Todds property is valued at $4,400,000 and is contributed subject to a liability of $1,800,000. (Again Todd contributes $2,600,000 of equity)

Complete the following

Mary Todd

Realized gain ________ ________

Recognized gain ________ _________

Basis of stock _________ _________

MT basis in contributed asset __________ _________