Seth, Pete, Cara, and Jen form Kingfisher Corporation with the following consideration:

Consideration Transferred

Basis to Transferor Fair Market Value Number of Shares Issued

From Seth ---

Inventory $30,000 $96,000 30*

From Pete ---

Equipment ($30,000 of depreciation

taken by Pete in prior years) 45,000 99,000 30**

From Cara ---

Proprietary process 15,000 90,000 30

From Jen ---

Cash 30,000 30,000 10

*Seth receives $6,000 in cash in addition to the 30 shares

**Pete receives $9,000 in cash in addition to the 30 shares

Assume that the value of each share of Kingfisher stock is $3,000. As to these transactions, provide the following information:

a. Seth's recognized gain or loss. Identify the nature of any such gain or loss.

b. Seth's basis in the Kingfisher Corporation stock.

c. Kingfisher Corporation's basis in the inventory.

d. Pete's recognized gain or loss. Identify the nature of any such gain or loss.

e. Pete's basis in the Kingfisher Corporation stock.

f. Kingfisher Corporation's basis in the equipment.

g. Cara's recognized gain or loss.

h. Cara's basis in the Kingfisher Corporation stock.

i. Kingfisher Corporation's basis in the proprietary process.

j. Jen's recognized gain or loss.

k. Jen's basis in the Kingfisher stock.

The attached Excel worksheet needs to be completed by answering the above questions.

IRC 351 Prob. 12-16 YOUR ANSWERS SMELL TEST FMV Received - FMV Given Up Economic Gain Realized Check figures Control Number of Shares Received Number of Shares - Not Control Shares Number of Shares - Control Shares Percentage of Control Shares RECOGNIZED (& DEFERRED) Tax Gain Realized -Amount Deferred or Excluded Tax Gain Recognized Check figures Type of Income (Ordinary/Capital) CORPORATION'S BASIS IN PROPERTY Basis Given Up + Increases to basis Tax Basis Pete Cara Jen $0 $0 $0 $0 $0 REALIZED FMV Received - Basis Given Up Tax Gain Realized SHAREHOLDER'S BASIS IN STOCK Basis Given Up - Decreases to basis + Increases to basis Tax Basis Seth $0 $0 $0 $0 $66,000 $0 $54,000 $0 $75,000 $0 $0 0 0 #DIV/0! 0 0 #DIV/0! 0 0 #DIV/0! $0 $0 $0 $0 $0 $6,000 Ordinary $0 $9,000 Ordinary $0 $0 $0 $0 $0 $0 $0 $0 No Sect 362 Election Made $0 $0 $0 $0 0 Shares 0 0 0 #DIV/0! #DIV/0! See Fig 9-1 $0 $0 $0 $0 $0 $0 $0 $0 See Fig 9-2 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0