Question
On January 27, 2017 Andy and Barb form the AB Corporation by a transfer of the following: Andy: Cash $200,000 Equipment FMV $300,000 Basis $100,000
On January 27, 2017 Andy and Barb form the AB Corporation by a transfer of the following:
Andy: Cash $200,000
Equipment FMV $300,000 Basis $100,000
Barb: Land and Building FMV $500,000 Basis $400,000
Both Andy and Barb receive stock in AB Corporation valued at $500,000.
Complete the following schedule
Andy _ Barb
Amount Realized __________________ ___________________
Realized Gain
Recognized Gain
Basis in Stock Received __________________ ___________________
What basis will the corporation take in:
The equipment ___________________________
The land/building ___________________________
The equipment is 7-year depreciable property. AB Corporation will depreciate this property (circle the appropriate answer)
As new recovery property placed in service on January 27, 2017
By taking over the depreciable life and method used by Andy
Because the corporation is not the original user, the equipment will not be depreciable in the hands of the corporation
VARIATION
Assume the same facts as in the original example, with one variation. Barbs land and building is contributed subject to a $200,000 liability. AB Corporation assumes this liability. The stock issued to Barb is reduced in value by $200,000 to reflect the liability assumption. Therefore Andy receives stock valued at $500,000 and Barb receives stock valued at $300,000. Complete the following schedule based on this one change:
Amount Realized Barb ________________________
Realized Gain Barb ________________________
Recognized Gain Barb ________________________
Basis of Stock Received Barb ________________________
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