Problem 4-30 (10.1, 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 qualify under $ 351? Yes because all of Patricia's stock is counted in determining control since the property she transferred has more than a nominal value in comparison to the value of the services rendered Feedback Check My Work Nonrecognition treatment for the property transferors may be lost it too much" stock is transferred to persons who did not contribute property b. What are the tax consequences to Dan and Patrio? Dan recognizes po gain or loss on the transfer of the land, He basis in the Crane stock is : compensation income of 50,000 on the transfer. Patricia has a basis of 60,000 v. Patrios recognizes 30,000 in her Crane stock Feed Check My Web Correct aunprogress=false 3 eBook O? 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 as organizational costs 50,000 for the services provided by Patricia, or it will capitalize the Check My Wor Comed d. Enter the results of this transaction to Patricia on her Form 1040 (page 1. Assume Patricia single, age 40, has no other income, and claims a standard deduction of $12,400 (for 2020). She does not want to go to the presidential election campaign. Enter all amounts as positive numbers. 2020 OMB No 1545-0074 LAS Use On Dement of the True 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 Wages, salaries, tips, etc. Attach Form(s) W-2 1 50,000 Attach Sch. Bif required. 2b 3b 4b 2a Tax-exempt interest .. 2a b Taxable interest 3a Qualified dividends... 3a b Ordinary dividends 4a IRA distributions .... 4a b Taxable amount 5a Pensions and annuities 5a b Taxable amount. 6a Social security benefits b Taxable amount. 7 Capital gain or loss). Attach Schedule D if required. If not required, check here... 8 Other income from Schedule 1, line 9 Sb 6b 7 8 9 Add lines 1, 2, 3, 4, 5b, 6b, 7, and 8. This is your total income 9 50,000 Standard Deduction for Single or Married filing separately, $12,400 Married filing jointly or Qualifying widower), $24,800 Head of household $18,650 . If you checked any box under Standard Deduction, see instructions 10 Adjustments to income a From Schedule 1, line 22.. .... 10a b Charitable contributions if you take the standard deduction. See instructions 10b Add lines 10a and 10b. These are your total adjustments to income 100 11 Subtract line 10c from line 9. This is your adjusted gross income 11 50,000 12 0 X 12 Standard deduction or itemized deductions (from Schedule A) 13 Qualified business income deduction, Attach Form 8995 or Form 8995-A.. 13 14 Add lines 12 and 13. 14 15 Taxable income. Subtract line 14 from line 11. If zero or less, enter -- 15 0 x For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions, Cat No. 113200 Form 1040 (2020) Previous Ne Check My Work
