Question
Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $280,000 in return for 50 percent of the corporations stock. Hermione contributed
Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $280,000 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:
To equalize the exchange, Wizard Corporation paid Hermione $140,000 in addition to her stock.
Assume Hermiones adjusted basis in the land was $420,000. h. What amount of gain or loss does Hermione realize on the formation of the corporation? What amount, if any, does she recognize?
Assume Hermiones adjusted basis in the land was $420,000. i. What adjusted basis does Wizard Corporation take in the land and building received from Hermione?
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