Reference no: EM133000880
Question - Bill and Sue formed the Y Corporation on May 16, 20X3. Bill contributed $80,000 cash and services worth $70,000. Sue contributed equipment worth $250,000 with a basis of $75,000, which was subject to a mortgage of $100,000. Sue's holding period for the equipment began on April 9, 20X1. The equipment had depreciation recapture potential of $40,000 and was Sue's sole §1231 asset.
Bill received $150,000 worth of Y co. stock. Sue received $140,000 worth of Y co. stock and $10,000 cash.
Required -
a. Determine Bill's reportable income and his basis in the Y stock.
b. Determine Y co.'s net recognized gain or loss, expense and/or depreciation recapture potential.
c. Determine Y co.'s basis in the equipment and when it's holding period begins.
d. Determine Sue's recognized gain or loss.
e. Determine Sue's basis in her Y co. stock and when her holding period begins.
f. Assume the facts were the same, except that Bill had contributed $145,000 worth of services and $5000 cash. Determine Sue's recognized gain or loss.
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