TJ Magnasen contributed assets with a $200,000 adjusted basis and a $525,000 FMV to Adelante Corporation in exchange for all of its stock. The corporation conducted operations for five years and was liquidated. TJ received the following in a liquidating distribution: $615,000 cash (less federal income taxes of 21% owed on the liquidation by the corporation) The assets that he had originally contributed, which now have a $150,000 adjusted basis and a $615,000 FMV.

a) What are the tax consequences of the corporate formation? (Shareholders/corporations recognized gain/loss, shareholders basis and holding period in his stock, corporations basis and holding period in contributed property)

b) What are the tax consequences of the corporate liquidation? (Shareholders/corporations recognized gain/loss, shareholders basis and holding period in distributed property)

2) Assume the same facts as in problem 1 above, except that assets were contributed by Baylor Corporation to Adelante Corporation.

a) What are the tax consequences of the corporate formation? If they are unchanged from problem 1, write NO CHANGE.

b) What are the tax consequences of the corporate liquidation? If they are unchanged from problem 1, write NO CHANGE.