During discussions relating to the formation of Kingfisher, Seth mentions that he may be interested in either (1) just selling all of his inventory in the current year for its fair market value of $96,000 or (2) proceeding with his involvement in Kingfisher's formation as shown above but followed by a sale of his stock five years later for $90,000. What would be the tax cost of these alternative plans, stated in present value terms? Assume a discount rate of 6%.

The present value factors at 6% for year 1 is 1.000 and for 0.7473 for year 5.

Seth's tax cost associated with the current sale of inventory for $96,000 is $______

Seth's tax cost associated with the current receipt of 30 Kingfisher shares and $6,000 cash and the subsequent sale of 30 Kingfisher shares for $90,000 in five years is $______

A tax rate wasn't given, that was all the info given for that part of the problem. I posted the rest of the problem below, which I got the rest correct but couldn't figure out the last part,

Seth, Pete, Cara, and Jen form Kingfisher Corporation with the following consideration:

			Consideration Transferred
			Basis to Transferor		Fair Market Value		Number of Shares Issued
From Seth
	Inventory		$30,000		$96,000		30	*
From Pete
	Equipment ($30,000 of depreciation taken by Pete in prior years)		45,000		99,000		30	**
From Cara
	Proprietary process		15,000		90,000		30
From Jen
	Cash		30,000		30,000		10

*Seth receives $6,000 in cash in addition to the 30 shares. **Pete receives $9,000 in cash in addition to the 30 shares.

The value of each share of Kingfisher stock is $3,000.

As to these transactions, provide the following information:

a. Seth recognizes $ as ordinary gain .

Feedback

Section 351 provides that gain or loss is not recognized upon the transfer of property to a corporation when certain conditions are met. This provision reflects the principle that gain should not be recognized when a taxpayer's investment has not substantively changed. Questions have arisen concerning what constitutes property for purposes of 351. In general, the definition of property is comprehensive.

b. Seth's basis in the Kingfisher Corporation stock is $.

Feedback

Correct

c. Kingfisher Corporation's basis in the inventory. $

Feedback

Correct

d. Pete recognizes a gain of $.

Feedback

Correct

e. Pete's basis in the Kingfisher Corporation stock is $.

Feedback

Correct

f. Kingfisher Corporation's basis in the equipment is $.

Feedback

Correct

g. Cara's has no gain or loss .

Feedback

Correct

h. Cara has a basis of $ in the Kingfisher Corporation stock.

Feedback

Correct

i. Kingfisher Corporation has a basis of $ in the proprietary process.

Feedback

Correct

j. Jen has no gain or loss on the transfer.

Feedback

Correct

k. Jen has a basis of $ in the Kingfisher Corporation stock.

Feedback

Correct