Question
Fill in the blanks using the Answer key below. A, B, C, and D transfer property to X corporation in exchange for 100% of its
Fill in the blanks using the Answer key below.
A, B, C, and D transfer property to X corporation in exchange for 100% of its stock.Each receives 25% of its shares as a result.A transfers land with a basis of $25,000 and a fair value of $20,000.B transfers equipment with a basis of $5,000 and a fair value of $20,000 (prior depreciation of $15,000 was taken).C transfers $20,000 in cash.D transfers a $20,000 (face value and amount) installment note that he had received in exchange for a capital asset in which D had a $2,000 basis.
- A realizes a -blank- and recognizes a-blank-.
- B realizes a-blank- and recognizesB realizes a-blank-of it under Section 1245 due the prior depreciation.
- The transfer of money by C -blank- the exchange from qualifying under Section 351(a) because money -blank- considered property for this purpose.
- D realizes a-blank- gain -blank-recognize it.This hinges on whetherSection 453B(a) applies, noting it generally requires the recognition of any gain realized upon the disposition of an installment obligation.
- If A sells his stock in X corporation for $20,000, then A will recognize either a $5,000 loss or a $0 loss depending on whether an election under Section -blank- is made.
- X corporation assumes a-blank- basis in the land absent an election to instead assume a -blank-. X corporation also assumes a-blank- basis in the equipment and a -blank- basis in the installment obligation.
Answer Key
$5,000 loss
$0 loss
$5,000 gain
$15,000 gain
none
all
prevents
does not prevent
is
is not
$18,000
$0
and has to
but does not have to
351(a)
362(e)(2)(A)
358(a)
$20,000
$25,000
$5,000
$2,500
$2,000
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started