Jones, Able, and Smith want to form Shriver Corporation. They want to accomplish this in the most tax efficient (least costly) way possible. They have asked for advice. The counselor will receive $10,000 (in stocks and bonds). The relevant information follows:
PARTY GIVES RECEIVES
Jones FMV Adj. Basis
Machine $100,000 $70,000 *
Land $40,000 $20,000 (1) 25 shares of stock
Building $65,000 $45,000 ** (2) $20,000
* Acquired for $85,000; s.l. depreciation taken
** Acquired for $70,000; s.l. dep. Taken; liab. Of $60,000
assumed by Shriver Corp.
Able
Machine $70,000 $80,000 * (1) 8 shares of stock
Building $50,000 $65,000 ** (2) 2 10-year bonds
(3) $5,000
* Acquired for $95,000' s.l. depreciation taken
** Acquired for $75,000; s.l. depreciation taken
liability of $70,000 is on the property
Smith
Machine $80,000 $80,000
Automobile $15,000 $10,000 * (1) 23 shares of stock
Truck $40,000 $30,000 ** (2) 8 10-year bonds
* Acquired for $15,000; s.l. depreciation taken
** Acquired for $40,000; s.l. depreciation taken
Counselor Services $10,000 (1) 1 share of stock
(2) 2 10-year bonds
Determine all tax consequences for Jones, Able, Smith, the counselor, and Shriver Corporation .