What is the amount of gain or loss to be recognized by adam

Assignment Help Taxation

Reference no: EM133472268

Case: On January 3, 2022, Adam, Brian, Charlie and Dave decide to form Newco Corp. as a vehicle through which they intend to engage in a business.

Adam transfers machinery with a FMV of $115,000 and an adjusted basis in his hands of $72,000 to the corporation in exchange for 100 shares of voting common stock. The machinery was encumbered by a $75,000 liability at the time of the transfer.

Brian contributes a truck with a FMV of $40,000 and an adjusted basis of $49,000 in exchange for 100 shares of voting common stock.

Charlie transfers land with a FMV equal to $287,000, which land is encumbered by a $247,000 liability and has an adjusted basis in his hands of $212,000, in exchange for 100 shares of voting common stock.

Dave receives 60 shares of stock in exchange for his agreement to render services for XYZ Corp valued at $23,000 and his contribution of $1,000 of cash.

Question 1: Does the incorporation of XYZ Corp qualify for treatment as a transfer to a controlled corporation pursuant to section 351?

Regardless of your answer to part a), assume that the incorporation satisfies the requirement of section 351 and will be treated as a transfer to a controlled corporation.

Question 2: What is the amount of the realized gain or loss for Adam, Brian and Charlie?

Question 3: What is the amount of gain or loss to be recognized by Adam, Brian and Charlie?

Question 4: What is the amount and character of any income to be recognized by Dave?

Question 5: What is the adjusted basis of the stock received from XYZ Corp. in the hands of Adam, Brian, Charlie and Dave?

Question 6: What is XYZ Corp's adjusted basis in the machinery, the truck and the land it received from its shareholders?

Reference no: EM133472268

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