Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Prisha, Juan, Hank, and Erica decide to pool the resources from their respective sole proprietorships and form a PJHE, Inc. These four individuals contribute the

Prisha, Juan, Hank, and Erica decide to pool the resources from their respective sole proprietorships and form a PJHE, Inc. These four individuals contribute the following items to form this corporation:

Asset Adj. Basis Fair Mkt Value Shares of Stock

Prisha Cash 50,000 50,000 1,000 shares

Equipment 10,000 50,000

Juan Building/land 80,000 250,000 1,500 shares

Mortgage* (100,000) (100,000)

Hank Computers 130,000 100,000 1,000 shares

Erica Office furnishings 40,000 150,000** 1,000 shares

*The corporation assumed the mortgage associated with Juans building.

**Erica received $50,000 of cash in addition to the 1,000 shares of stock.

Required:

Prisha:

  1. Does Prisha recognize gain, loss or income from this transaction? If so, what is the amount and character of this gain, income or loss?
  2. What is Prishas basis in ABC stock?
  3. What is ABCs basis in the equipment?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Horngrens Accounting

Authors: Tracie L. Miller Nobles, Brenda L. Mattison, Ella Mae Matsumura

11th edition

978-0133851151, 013385115X, 978-0133866889

More Books

Students also viewed these Accounting questions

Question

How does service quality differ from manufacturing quality?

Answered: 1 week ago