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