Ted decides to incorporate his medical practice. He uses the cash method of accounting. On the date of incorporation, the practice reports the following balance sheet:

All the current liabilities would be deductible by Ted if he paid them. Ted transfers all the assets and liabilities to a professional corporation in exchange for all of its stock. Read the requirements

.Requirement a. What are the amount and character of Ted's recognized gain or loss?

Ted realizes a(n)			and recognizes		due to

Requirement b. What is Ted's basis in the stock?

Ted's basis in the stock received is

.

Requirement c. What is the corporation's basis in the property?

The corporation's basis in the property is

.

Requirement d. Who recognizes income on the receivables upon their collection? Can the corporation obtain a deduction for the liabilities when it pays them?

	must recognize the income from the receivables upon their collection. The corporation
obtain a deduction for the current liabilities when

Choose from any list or enter any number in the input fields and then continue to the next question.

	Basis	FMV
Assets:
Cash	$5,000	$5,000
Accounts receivable	0	65,000
Equipment (net of $15,000 depreciation)	35,000	40,000
Total	$40,000	$110,000
Liabilities and Owner's Equity:
Current liabilities	$0	$35,000
Note payable on equipment	15,000	15,000
Owner's equity	25,000	60,000
Total	$40,000	$110,000

Data Table