MY WORK (IS IT CORRECT?):

FMV of stock received $ 220,000

+ Cash (boot) received 120,000

= Amount realized $ 340,000

Adjusted basis of property transferred (170,000 )

= Gain realized $ 170,000

Because the IRS holds that recognition of gains on 351 transfers is calculated for each asset, it is necessary to allocate the boot to each of the assets according to the FMV of each asset. The $120,000 of boot is allocated as follows:

Building: $136,000 / $340,000 $120,000 = $48,000

Land: $204,000 / $340,000 $120,000 = $72,000

Hermione then computes the gain recognized by computing the amount of gain or loss on each asset transferred in the exchange and then recognizing the lesser of the gain realized or the amount of boot allocated to each asset as follows:

Building

Fair market value of stock received $ 88,000

+ Cash (boot) received 48,000

=Amount realized $ 136,000

Adjusted basis of assets transferred (34,000 )

=Gain realized $ 102,000

Land

Fair market value of stock received $ 132,000

+ Cash (boot) received 72,000

=Amount realized $ 204,000

Adjusted basis of assets transferred (136,000 )

=Gain realized $ 68,000

Hermione recognizes gain of $116,000, equal to the lesser of gain realized or boot received on each of the assets computed as follows: A $48,000 gain is recognized on the building and a gain of $68,000 is recognized on the land.

Required information [The following information applies to the questions displayed below.) Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $220,000 in return for 50 percent of the corporation's stock. Hermione contributed a building and land with the following fair market values and adjusted bases in return for 50 percent of the corporation's stock: Building Land Total FMV $136,000 204,000 $340,000 Tax- Adjusted Basis $ 34,000 136,000 $170,000 To equalize the exchange, Wizard Corporation paid Hermione $120,000 in addition to her stock. c. What amount of gain or loss does Hermione realize on the formation of the corporation? What amount, if any, does she recognize