Question
Kevin and Nicole form Indigo Corporation with the following transfers: inventory from Kevin (basis of $360,000 and fair market value of $500,000, subject to a
Kevin and Nicole form Indigo Corporation with the following transfers: inventory from Kevin (basis of $360,000 and fair market value of $500,000, subject to a lien for a loan of $100,000 used to finance the acquisition of the inventory) and improved real estate from Nicole (basis of $320,000 and fair market value of $375,000). Nicole, an accountant, agrees to contribute her services (worth $25,000) in organizing Indigo. Each receives 100 shares of stock. As a result of these transfers:
a. Indigo can deduct $25,000 as a business expense. b. Nicole has a recognized gain of $55,000 on the transfer of the real estate. c. Indigo has a basis of $260,000 in the inventory. d. Indigo has a basis of $375,000 in the real estate. e. Indigo has an organizational expenditure of $25,000 that must be capitalized, and which it may elect to deduct up to a maximum amount of $5,000 immediately and to amortize the remainder.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started