Part 1 Scenario Mark, John, Paul, and Peter formed Applesauce Co., a C corporation, on January 2, Year 1. Information regarding each shareholder's contributions and stock ownership is provided below. Shareholder Property Contributed Stock Received Mark $20,000 cash; property worth $60,000 ($40,000 basis) 40% John 20% $10,000 cash; property worth $50,000 ($30,000 basis), with related liability of $20,000 assumed by the corporation Paul 25% Property worth $60,000 ($50,000 basis); received $10,000 in cash from corporation Peter 15% $10,000 in cash; property worth $40,000 ($5,000 basis), with related liability of $20,000 assumed by the corporation 100% Shareholder Gain Realized Shareholder Shareholder Gain Tax Basis in Recognized Stock Corporation's Tax Basis in Noncash Property Received From Shareholder Mark John Paul Peter Part 2 Scenario Baker, Cassie, Banner, and Miller are knowledgeable about pool design. They have decided to pool their knowledge and resources to form Rio Salado Enterprises Inc., a C corporation. They will provide professional services to area businesses and homeowners. All participants expect to work full time for Rio Salado Enterprises, and each expects to contribute sufficient assets to become a 25% shareholder with total stock equity of $50,000 each. In addition to the skills that each brings to the new entity, the owners will contribute assets that will enhance the company's ability to provide quality technical design and planning services. These assets include a building, land, pool excavating equipment, office furniture, and cash for initial operating expenses. The assets contributed by each shareholder, along with any related liabilities assumed by the corporation, are provided below. Shareholder FMV of noncash property contributed Liability assumed by corporation Basis in noncash property contributed Cash Cash paid to Contributed shareholder by corporation Baker 121,000 61,000 100,000 0 10,000 Cassie 81,000 51,000 40,000 21,000 0 Banner 41,000 21,000 20,000 31,000 0 Miller 71,000 0 50,000 o 20,000 Gain Realized Gain Recognized Tax Basis in Shares Baker Banner Part 1 Scenario Mark, John, Paul, and Peter formed Applesauce Co., a C corporation, on January 2, Year 1. Information regarding each shareholder's contributions and stock ownership is provided below. Shareholder Property Contributed Stock Received Mark $20,000 cash; property worth $60,000 ($40,000 basis) 40% John 20% $10,000 cash; property worth $50,000 ($30,000 basis), with related liability of $20,000 assumed by the corporation Paul 25% Property worth $60,000 ($50,000 basis); received $10,000 in cash from corporation Peter 15% $10,000 in cash; property worth $40,000 ($5,000 basis), with related liability of $20,000 assumed by the corporation 100% Shareholder Gain Realized Shareholder Shareholder Gain Tax Basis in Recognized Stock Corporation's Tax Basis in Noncash Property Received From Shareholder Mark John Paul Peter Part 2 Scenario Baker, Cassie, Banner, and Miller are knowledgeable about pool design. They have decided to pool their knowledge and resources to form Rio Salado Enterprises Inc., a C corporation. They will provide professional services to area businesses and homeowners. All participants expect to work full time for Rio Salado Enterprises, and each expects to contribute sufficient assets to become a 25% shareholder with total stock equity of $50,000 each. In addition to the skills that each brings to the new entity, the owners will contribute assets that will enhance the company's ability to provide quality technical design and planning services. These assets include a building, land, pool excavating equipment, office furniture, and cash for initial operating expenses. The assets contributed by each shareholder, along with any related liabilities assumed by the corporation, are provided below. Shareholder FMV of noncash property contributed Liability assumed by corporation Basis in noncash property contributed Cash Cash paid to Contributed shareholder by corporation Baker 121,000 61,000 100,000 0 10,000 Cassie 81,000 51,000 40,000 21,000 0 Banner 41,000 21,000 20,000 31,000 0 Miller 71,000 0 50,000 o 20,000 Gain Realized Gain Recognized Tax Basis in Shares Baker Banner