A and B, two individuals, formed X Corporation on January 1 of Year 1. On that date, A contributed a capital asset ("CA#l") with a fair market value ("FMV") of $50,000 and an adjusted basis of $28,000, which A owned for 5 years, and a Capital Asset ("CA#2") with a FMV of $50,000 and an adjusted basis of $55,000, which A had owned for 2 months, to X Corporation in exchange for 90 shares of X stock and $10,000 cash; and B contributed stock in Y Corporation (representing 1% ownership in Y) with a FMV of $70,000 and an adjusted basis of $25,000 and managerial services (all performed in Year 1) worth $20,000, also in exchange for 90 shares of X stock Also During Year 1 . X received $43,000 of revenue from operations X received $5,000 dividend from Y X properly took $8,000 of depreciation on CA#2 Contributed $10,000 cash to a qualified charity During Year 2 X received $20,000 of revenue from operations X received $5,000 dividend from Y X sold CA#2 for $52,000 X distributed $5,000 cash to A and $5,000 cash to B. a. What is X' taxable income in Year I? b. What is X' taxable income in Year 2? c. What income, gain or loss, if any would B recognize if B sold all of his or her shares to C for $60,000 ? d. What income, gain or loss, if any, including character, does A recognize as a result of the transfer on January 1 of Year 1? A and B, two individuals, formed X Corporation on January 1 of Year 1. On that date, A contributed a capital asset ("CA#l") with a fair market value ("FMV") of $50,000 and an adjusted basis of $28,000, which A owned for 5 years, and a Capital Asset ("CA#2") with a FMV of $50,000 and an adjusted basis of $55,000, which A had owned for 2 months, to X Corporation in exchange for 90 shares of X stock and $10,000 cash; and B contributed stock in Y Corporation (representing 1% ownership in Y) with a FMV of $70,000 and an adjusted basis of $25,000 and managerial services (all performed in Year 1) worth $20,000, also in exchange for 90 shares of X stock Also During Year 1 . X received $43,000 of revenue from operations X received $5,000 dividend from Y X properly took $8,000 of depreciation on CA#2 Contributed $10,000 cash to a qualified charity During Year 2 X received $20,000 of revenue from operations X received $5,000 dividend from Y X sold CA#2 for $52,000 X distributed $5,000 cash to A and $5,000 cash to B. a. What is X' taxable income in Year I? b. What is X' taxable income in Year 2? c. What income, gain or loss, if any would B recognize if B sold all of his or her shares to C for $60,000 ? d. What income, gain or loss, if any, including character, does A recognize as a result of the transfer on January 1 of Year 1
