ONLY NEED REQUIREMENT A

Six years ago, Demi purchased land as an investment. The land cost $180,000 and is now worth $440,000. Demi plans to transfer the land to Baxter Corporation, which will subdivide it and sell individual tracts. Baxter's income on the land sales will be ordinary in character. Read the requirements. Requirement a. What are the tax consequences of the asset transfer and land sales if Demi contributes the land to Baxter in exchange for all its stock? Demi recognizes a loss of $180,000 on the transfer of land to Baxter Corporation. Baxter's basis in the land will be 180000. All gain on the subsequent sales will be ordinary income to Baxter. This alternative results in the that accrued prior to Demi's transfer and the being taxed at a 21% tax rate. earned from subdividing the land ways can the transaction be structured to achieve more favorable tax results? Assume Demi's marginal 0% + 3.8% on net investment income), and Baxter's tax rate is 21%. pre-contribution gain to Baxter in exchange for stock and debt instruments equal to her realized gain. In this case, Demi capital gain and Baxter's basis in the land would be the FMV f the land. The pre-contribution capital pre-contribution loss s that Demi has recognized) is taxed at the applicable capital gains tax rate (in this case, 23.8%, ment tax). The step-up in basis permits Baxter to use the additional basis to offset income earned from post-contribution profit erwise would be taxed at a 21% marginal tax rate. t will allow Demi to avoid Sec. 351. post-contribution loss ec. 351 provisions. By including an election with her timely filed income tax return in the year of the Sec. 351 provisions. OD. Demi could find another investor who is willing to contribute property valued at $180,000 in exchange for 50% of the stock of the corporation. LIGITUIUI, DUL VuruvvIU LETU Activate Windows Go to Satin toate Window