Corporate Formations Problem

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

Mary $400,000 cash

Todd $400,000 FMV property

$300,000 tax basis

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

Complete the following chart:

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 $600,000 but is contributed subject to a $200,000 liability.

Complete the following chart:

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 $800,000 and is contributed subject to a liability of $400,000.

Complete the following chart:

Mary Todd

Realized gain ________ ________

Recognized gain ________ _________

Basis of stock _________ _________

MT basis in contributed asset __________ _________