Reference no: EM132673522
Problem - Doris, Walt, and Pat form Swan Corporation with the following investments.
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Basis to Transferor
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Fair Market Value
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Number of Shares Issued
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From Doris-cash
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$200,000
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$200,000
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200
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From Walt-equipment
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400,000
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300,000
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300
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From Pat-land
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550,000
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600,000
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500
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In addition to the 500 shares of stock, Pat receives $100,000 in cash from Swan Corporation. Assume that each share of Swan stock is worth $1,000.
a. How much loss does Walt realize? Recognize?
b. What is Walt's basis in the Swan stock?
c. What is Swan Corporation's basis in the equipment?
d. How much gain does Pat realize? Recognize?
e. What is Pat's basis in the Swan stock?
f. What is Swan's basis in the land?
g. In terms of the answers to parts (a) through (f), does it matter whether Swan is formed as a C corporation or as an S corporation? Explain.
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