Determine the basis of stock in the hands of the shareholder in each of the following instances

47. Determine the basis of stock in the hands of the shareholder in each of the following instances. Assume that the 80% rule is met in all cases.

a. Contribution of property with a basis of $1,000 and a FMV of $1,400.
b. Contribution of property with a basis of $3,000 and a FMV of $3,800. The stockholder also received $500 cash from the corporation as part of the stock transaction.
c. Contribution of property with a basis of $8,200 and a FMV of $12,500. The stockholder also received property with a FMV of $1,700 from the corporation as part of the stock transaction.
d. Contribution of a building with a FMV of $200,000, a mortgage (assumed by the corporation) of $100,000, and a basis of $125,000.
e. Contribution of a building with a FMV of $1,700,000, a mortgage (assumed by the corporation) of $1,000,000, and a basis of $635,000


Click here for the solution: Determine the basis of stock in the hands of the shareholder in each of the following instances

Spinone Corporation directs its sole shareholder to exchange all of his common stock valued at $200,000 (basis of $50,000) for $100,000 of common stock, $80,000 of preferred stock, and $20,000 in cash

Spinone Corporation directs its sole shareholder to exchange all of his common stock valued at $200,000 (basis of $50,000) for $100,000 of common stock, $80,000 of preferred stock, and $20,000 in cash. In addition, Spinone directs its sole bondholder to exchange her $150,000 of bonds paying 6.0% for $170,000 of bonds paying 5.3% How are these transactions treated for tax purposes by the shareholder, the bondholder, and Spinone?

Click here for the solution: Spinone Corporation directs its sole shareholder to exchange all of his common stock valued at $200,000 (basis of $50,000) for $100,000 of common stock, $80,000 of preferred stock, and $20,000 in cash

Tanesha is the sole shareholder of Egret Corporation

Tanesha is the sole shareholder of Egret Corporation. Egret’s sales have doubled in the last four years, and Tanesha has determined that the business needs a new warehouse. Tanesha has asked your advice as to whether she should (1) have the corporation acquire the warehouse or (2) acquire the warehouse herself and rent it to the corporation. What are the relevant tax issues that will you will discuss with Tanesha?

Click here for the solution: Tanesha is the sole shareholder of Egret Corporation