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problem: On March 1 of the current year, Bob, Alice, Carla, & Dick form Bear Corporation and transfer the following items:

Property Transferred

Transferor

Asset

Basis to Transferor

FMV

Number Common Shares Issued

Alice

Land

$12,000

$30,000

 

 

Building

38,000

70,000

400

 

Mortgage on the land and building

60,000

60,000

 

Bob

Equipment

25,000

40,000

300

Carla

Van

15,000

10,000

50

Dick

Accounting services

-0-

10,000

100

Alice buy the land and building several years ago for $12,000 and $50,000, respectively. Alice has claimed straight-line depreciation on the building. Bob also receives a Bear note for USD 10,000 due in three years. The note bears interest at the prevailing market rate. Bob purchased the equipment three years ago for USD 50,000. Carla also receives $5,000 cash. Carla purchased the van two years ago for USD 20,000.

[A] Does the transaction satisfy the requirements of Sec. 351?

[B] Determine the amount and character of the gains or losses recognized by Alice, Bob, Carla, Dick, and Bear?

[C] Determine each shareholder's basis in his or her Bear stock? When does the holding period for the stock begin?

[D] What is Bear's basis in its property and services? When does the holding period for each property begin?

Risk Management, Finance

  • Category:- Risk Management
  • Reference No.:- M916251

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