Posted: January 31st, 2016

The fair market value of Elm’s stock at the time of the transfer was $30,000. What is the amount of Anna’s recognized gain? Explain.

1. Anna transferred land with an adjusted basis to her of $20,000 and a fair market value of $56,000 to Elm Corporation in exchange for 100% of Elm Corporation’s only class of stock. The land was subject to a liability of $26,000, which Elm assumed for legitimate business purposes. The fair market value of Elm’s stock at the time of the transfer was $30,000. What is the amount of Anna’s recognized gain? Explain.
2. John Smith transferred money and property to Corporation X solely in exchange for stock in X. Immediately after the exchange, John owned 80% of the total combined voting power of all classes of stock entitled to vote and 51% of all other classes of stock. No gain or loss will be recognized by John or X. True or False – explain.
3. If a shareholder of a controlled or solely owned corporation receives no additional shares for a contribution of property to the corporation, the basis of the property received by the corporation is the same as it was to the shareholder. True or False – explain!
4. A corporation’s holding period for an asset received in a nontaxable capital contribution includes the time the asset was held by the transferor. True false – explain!
5. Michael contributes equipment with a $25,000 adjusted basis and a $40,000 FMV to Miller Corporation for 25 of its 50 shares of stock. His son, Michael Jr., contributes $10,000 cash for the remaining 25 Miller shares. What tax issues should Michael and his son consider with respect to the stock acquisitions?