Question
Huppe and Heeter decide to form a new corporation - H2O Meetings and Incentives Corp. Huppe contributes property with a tax basis of $2 million
Huppe and Heeter decide to form a new corporation - H2O Meetings and Incentives Corp. Huppe contributes property with a tax basis of $2 million and a fair market value of $5 million, in exchange for 1,000 shares of H2O Meetings and Incentives stock and $1,000,000 of cash (H2O Meetings and Incentives borrows the cash from a financial institution). Heeter contributes property with a tax basis of $1.1 million and a fair market value of $1.5 million in exchange for 200 shares of H2O Meetings and Incentives stock and $500,000 of cash. Each share of H2O Meetings and Incentives stock is worth $5,000. Assume that this corporate formation meets the requirements of I.R.C. Section 351 (Huppe and Monty control 80% of H2O Meetings and Incentives after the exchange).
- How much taxable gain or loss will Huppe recognize as a result of the transaction?
- What basis will Huppe take in the H2O Meetings and Incentives stock he receives?
- How much taxable gain or loss will Heeter recognize as a result of the transaction?
- What basis in Heeters property will H2O Meetings and Incentives Corp. take?
- What basis will Heeter take in the H2O Meetings and Incentives stock he receives?
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