What amount of gain does Jorge recognize on the exchange

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Problem - Jorge contributed land he held as an investment (fair market value $120,000; basis $55,000) and inventory (fair market value $80,000; basis $75,000) to ABC Corporation in exchange for 50 percent of the ABC stock (50 shares valued at $160,000) and $40,000 cash in a qualifying $351 exchange.

Required -

a. What amount of gain does Jorge recognize on the exchange? What is the character of the gain? What would be Jorge's basis in his ABC stock after the exchange?

b. The land is a capital asset so the $24,000 would be a capital gain whereas the gain on the inventory is ordinary income.

c. Assume the same facts except that Jorge received $40,000 of business property from ABC instead of $40,000 cash. What is the amount and character of gain Jorge would recognize on the exchange?

Reference no: EM133015849

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