Problem 18-30 (LO. 1, 2) Dan Knight and Patricia Chen, who are good friends, form Crane Corporation. Dan transfers land (worth $200,000, basis of $60,000) for 50% of the stock In Crane, Patricia transfers machinery (worth $150,000, adjusted basis of $30,000) and provides services worth $50,000 for 50% of the stock a. Will the transfers quality under $ 351? because all of Patricia's stock is counted in determining control since the property she transferred has more nominal value in comparison to the value of the services rendered. Yes than a b. What are the tax consequences to Dan and Patricia? Dan recognizes no gain or loss on the transfer of the land. His basis in the Crane stock is $ 60,000 Patricia recognizes compensation income of 50,000 on the transfer. Patricia has a basis of 80,000 in her Crane stock. c. What is Crane Corporation's basis in the land and the machinery? Crane Corporation has a basis of 60,000 in the land and a basis of 30,000 in the machinery In addition, Crane either has a deduction of 50,000 for the services provided by Patricia, or it will capitalize the 50,000 as organizational costs d. Enter the results of this transaction to Patricia on her Form 1040 (page 1). Assume Patricia is single, age 40, has no other income, and claims a standard deduction of $12,400 (for 2020). She does not want $3 to go to the presidential election campaign. Enter all amounts as positive numbers. d. Enter the results of this transaction to Patricia on her Form 1040 (page 1). Assume Patricia is single, age 40, has no other income, and claims a standard deduction of $12,400 (for 2020). She does not want $3 to go to the presidential election campaign. Enter all amounts as positive numbers. 2020 OMB No. 1545-0074 IRS Use Only Form Department of the Treasury--Internal Revenue Service (99) 1040 U.S. Individual Income Tax Return Filing Status Single Your first name and middle initial Last name Patricia Chen if joint return, spouse's first name and middle initial Last name Your social security number 123-45-6789 Spouse's social security number Home address (number and street). If you have a PO box, see instructions. Apt. no. Presidential Election Campaign Check here if you, or your spouse if City, town, or post office. If you have a foreign address, also complete niling jointly, want $3 to go to this State ZIP code spaces below fund. Checking a box below will not change your tax or refund Foreign country name Foreign province/state/county Foreign postal code At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency? Standard Someone can claimi Deduction Age/Blindness You: Spouset Dependents If more than four dependents, see (see instructions) (1) First name last name (2) Social security number (3) Relationship to you (4) If qualifies for (see instructions): Child tax credit Credit for other dependents instrucdons and check here D DO GO D 0 1 Wages, salaries, tips, etc. Attach Form(s) W-2 1 1 50,000 2a Tax-exempt interest .. 2a b Taxable interest ... 2b Attach Sch. Bit required. 3a 3b 3a Qualified dividends. 4a IRA distributions b Ordinary dividends b Taxable amount 4a 4b 5b 6b a 7 8 9 50,000 Sa Pensions and annuities 5a b Taxable amount Standard 6a Social Security benefits b Taxable amount Deduction for 7 Capital gain or loss). Attach Schedule D if required. If not required, check here Single or Marriedriling 8 Other income from Schedule 1, line 9 separately, $12,400 9 Add lines 1, 2, 3, 4, 55, 65, 7, and 8. This is your total income Married ling 10 Adjustments to income: jointly or Qualifying a From Schedule 1, line 22 10a widower), b Charitable contributions if you take the standard deduction $24,800 Head of See instructions 10b household c Add lines 10a and 10b. These are your total adjustments to income $18,650 If you checked 11 Subtract line 10c from line 9. This is your adjusted gross income any box under Standard 12 Standard deduction or itemized deductions (from Schedule A) Deduction, see instructions 13 Qualified business income deduction. Attach Form 8995 or Form 8995-A 14 Add lines 12 and 13 100 11 50,000 12 12,400 13 14 15 Taxable income. Subtract line 14 from line 11. If zero or less, enter-O- 15 38,400 For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate Instructions. Cat No. 11320B Form 1040 (2020) Problem 18-30 (LO. 1, 2) Dan Knight and Patricia Chen, who are good friends, form Crane Corporation. Dan transfers land (worth $200,000, basis of $60,000) for 50% of the stock In Crane, Patricia transfers machinery (worth $150,000, adjusted basis of $30,000) and provides services worth $50,000 for 50% of the stock a. Will the transfers quality under $ 351? because all of Patricia's stock is counted in determining control since the property she transferred has more nominal value in comparison to the value of the services rendered. Yes than a b. What are the tax consequences to Dan and Patricia? Dan recognizes no gain or loss on the transfer of the land. His basis in the Crane stock is $ 60,000 Patricia recognizes compensation income of 50,000 on the transfer. Patricia has a basis of 80,000 in her Crane stock. c. What is Crane Corporation's basis in the land and the machinery? Crane Corporation has a basis of 60,000 in the land and a basis of 30,000 in the machinery In addition, Crane either has a deduction of 50,000 for the services provided by Patricia, or it will capitalize the 50,000 as organizational costs d. Enter the results of this transaction to Patricia on her Form 1040 (page 1). Assume Patricia is single, age 40, has no other income, and claims a standard deduction of $12,400 (for 2020). She does not want $3 to go to the presidential election campaign. Enter all amounts as positive numbers. d. Enter the results of this transaction to Patricia on her Form 1040 (page 1). Assume Patricia is single, age 40, has no other income, and claims a standard deduction of $12,400 (for 2020). She does not want $3 to go to the presidential election campaign. Enter all amounts as positive numbers. 2020 OMB No. 1545-0074 IRS Use Only Form Department of the Treasury--Internal Revenue Service (99) 1040 U.S. Individual Income Tax Return Filing Status Single Your first name and middle initial Last name Patricia Chen if joint return, spouse's first name and middle initial Last name Your social security number 123-45-6789 Spouse's social security number Home address (number and street). If you have a PO box, see instructions. Apt. no. Presidential Election Campaign Check here if you, or your spouse if City, town, or post office. If you have a foreign address, also complete niling jointly, want $3 to go to this State ZIP code spaces below fund. Checking a box below will not change your tax or refund Foreign country name Foreign province/state/county Foreign postal code At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency? Standard Someone can claimi Deduction Age/Blindness You: Spouset Dependents If more than four dependents, see (see instructions) (1) First name last name (2) Social security number (3) Relationship to you (4) If qualifies for (see instructions): Child tax credit Credit for other dependents instrucdons and check here D DO GO D 0 1 Wages, salaries, tips, etc. Attach Form(s) W-2 1 1 50,000 2a Tax-exempt interest .. 2a b Taxable interest ... 2b Attach Sch. Bit required. 3a 3b 3a Qualified dividends. 4a IRA distributions b Ordinary dividends b Taxable amount 4a 4b 5b 6b a 7 8 9 50,000 Sa Pensions and annuities 5a b Taxable amount Standard 6a Social Security benefits b Taxable amount Deduction for 7 Capital gain or loss). Attach Schedule D if required. If not required, check here Single or Marriedriling 8 Other income from Schedule 1, line 9 separately, $12,400 9 Add lines 1, 2, 3, 4, 55, 65, 7, and 8. This is your total income Married ling 10 Adjustments to income: jointly or Qualifying a From Schedule 1, line 22 10a widower), b Charitable contributions if you take the standard deduction $24,800 Head of See instructions 10b household c Add lines 10a and 10b. These are your total adjustments to income $18,650 If you checked 11 Subtract line 10c from line 9. This is your adjusted gross income any box under Standard 12 Standard deduction or itemized deductions (from Schedule A) Deduction, see instructions 13 Qualified business income deduction. Attach Form 8995 or Form 8995-A 14 Add lines 12 and 13 100 11 50,000 12 12,400 13 14 15 Taxable income. Subtract line 14 from line 11. If zero or less, enter-O- 15 38,400 For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate Instructions. Cat No. 11320B Form 1040 (2020)