Scott incorporates his sole proprietorship as SuperiorCorporation and transfers its assets to Superior in exchange forall 100 shares of Superior stock and four $7,500 interest-bearingnotes. The stock has a $130,000 FMV. The notes mature consecutivelyon the first four anniversaries of the incorporation date. Theassets transferred are asâ follows:
Assets
Adjusted Basis
FMV
Cash
14400
14400
Equipment
135000
Minus: Accumulated Depreciation
(65000)
70000
60800
Building
85000
Minus: Accumulated Depreciation
(50000)
35000
51200
Land
25600
33600
Total
45000
160000
Requirement a. What are the amounts and character of tScottâ'srecognized gains orâ losses?Complete the table to determine theamount and character of Scottâ's recognized gain or loss for eachasset type. If an asset does not have a gain orâ loss, selectâ"N/A" for the character type.
Cash
Equipment
Building
Land
Assetâs FMV
Consideration Received in exchange for asset
Stock
Notes
Total Proceeds
Minus: Adjusted Basis
Realized gain (loss)
Boot Received
Recognized gain (loss)
Character of gain (loss)
Requirement b. What is Scottâ's basis in the Superior stock andânotes? Begin by determining the adjusted basis of the stock.
Adjusted basis of Property transferred to the corporation
Plus
Gain recognized by transferor
Minus
FMV of Boot Received
Adjusted basis of stock
Requirement c. What is Superiorâ's basis in the propertyreceived from Scottâ?
Cash
Equipment
Building
Land
Transferorâs adjusted basis in property transferred to thecorporation
Pus:
Minus:
Transferee corporationâs basis in property
Scott incorporates his sole proprietorship as SuperiorCorporation and transfers its assets to Superior in exchange forall 100 shares of Superior stock and four $7,500 interest-bearingnotes. The stock has a $130,000 FMV. The notes mature consecutivelyon the first four anniversaries of the incorporation date. Theassets transferred are asâ follows:
Assets | Adjusted Basis | FMV | |
Cash | 14400 | 14400 | |
Equipment | 135000 | ||
Minus: Accumulated Depreciation | (65000) | 70000 | 60800 |
Building | 85000 | ||
Minus: Accumulated Depreciation | (50000) | 35000 | 51200 |
Land | 25600 | 33600 | |
Total | 45000 | 160000 | |
Requirement a. What are the amounts and character of tScottâ'srecognized gains orâ losses?Complete the table to determine theamount and character of Scottâ's recognized gain or loss for eachasset type. If an asset does not have a gain orâ loss, selectâ"N/A" for the character type.
Cash | Equipment | Building | Land | |
Assetâs FMV | ||||
Consideration Received in exchange for asset | ||||
Stock | ||||
Notes | ||||
Total Proceeds | ||||
Minus: Adjusted Basis | ||||
Realized gain (loss) | ||||
Boot Received | ||||
Recognized gain (loss) | ||||
Character of gain (loss) |
Requirement b. What is Scottâ's basis in the Superior stock andânotes? Begin by determining the adjusted basis of the stock.
Adjusted basis of Property transferred to the corporation | ||
Plus | Gain recognized by transferor | |
Minus | FMV of Boot Received | |
Adjusted basis of stock |
Requirement c. What is Superiorâ's basis in the propertyreceived from Scottâ?
Cash | Equipment | Building | Land | |
Transferorâs adjusted basis in property transferred to thecorporation | ||||
Pus: | ||||
Minus: | ||||
Transferee corporationâs basis in property |