Question
Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $188,000 in return for 50 percent of the corporations stock. Hermione contributed
Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $188,000 in return for 50 percent of the corporations stock. Hermione contributed a building and land with the following fair market values and adjusted bases in return for 50 percent of the corporations stock:
FMV | Tax-Adjusted Basis | ||||
Building | $ | 104,000 | $ | 26,000 | |
Land | 156,000 | 104,000 | |||
Total | $ | 260,000 | $ | 130,000 | |
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To equalize the exchange, Wizard Corporation paid Hermione $72,000 in addition to her stock.
Assume Hermiones adjusted basis in the land was $188,000. g. What adjusted basis does Wizard Corporation take in the land and building received from Hermione?
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Assume Hermiones adjusted basis in the land was $260,000. h. What amount of gain or loss does Hermione realize on the formation of the corporation? What amount, if any, does she recognize?
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Assume Hermiones adjusted basis in the land was $260,000. i. What adjusted basis does Wizard Corporation take in the land and building received from Hermione?
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