Exam 9: Tax-Deferred Exchanges

David owns 600 shares of K Corporation stock when K is merged into Parent Corporation. David receives 500 shares of Parent Corporation stock (fair market value = $10,500) and $500 cash in exchange for his K Corporation stock. David's K stock had a basis of $8,000 and an $11,000 fair market value. What is David's realized and recognized gain, respectively?

Zandu Corporation exchanged a building (fair market value = $1,000,000, adjusted basis = $700,000) and two semi-tractor-trailers (fair market value = $300,000; adjusted basis = $225,000), all five years old, for land to build a new facility valued at $1,300,000. What is Zandu's realized and recognized gain and its basis in the land? Realized gain Recognized gain Basis of land

Sean inherited a farm his grandfather had purchased 50 years ago for $40,000. It was valued at $1,000,000 when his grandfather died but has a current value of $1,100,000. Sean did not like farming so he traded the farm for an apartment building valued at $950,000 owned by Jean that has a basis of $700,000. In addition, Sean received $150,000 in cash from Jean to finalize the exchange.

Parker exchanges an apartment building in Wisconsin for Cassidy's apartment building in Florida. Parker's building has a fair market value of $500,000, is encumbered by a $200,000 mortgage, and has a basis of $275,000. Cassidy's building has a fair market value of $350,000, is encumbered by a $50,000 mortgage, and has a basis of $175,000. They each assume the mortgages on the properties received. What are Parker's and Cassidy's amounts realized, their realized gain or loss, and their recognized gain or loss on the buildings exchanged?

Elizabeth exchanges an office building valued at $400,000 with a $75,000 mortgage and adjusted basis of $180,000 for land valued at $275,000. What is Elizabeth's recognized gain on the exchange?

Dylan, Luke, and Hannah form a partnership. Dylan contributes land with a fair market value of $25,000 (basis of $15,000) in exchange for a 25% interest. Luke contributes equipment with a $35,000 fair market value (basis of $38,000) in exchange for a 35% interest, and Hannah contributes a building with a $100,000 fair market value (basis = $35,000) and a mortgage of $60,000 (assumed by the partnership) in exchange for a 40% interest. What is Dylan's basis in his partnership interest?

As part of a divorce decree, Janet must give her ex-spouse Herman her half-interest in stock with a total value of $120,000 (total basis = $70,000) in exchange for his half-interest in their home with a total value of $150,000 and a basis of $130,000. What are Janet and Herman's realized and recognized gains or losses on this exchange? Janet: Realized Recognized Herman: Realized Recognized

Bertam transfers property with a $50,000 mortgage, a fair market value of $350,000, and a basis of $200,000 for stock valued at $300,000. If the corporation assumes the mortgage, what is Bertram's basis in the stock received in this qualifying Section 351 transaction?

Which of the following is not a divisive reorganization?

Four shareholders form a new corporation in exchange for stock with a fair market value of $1,000 per share. Benjamin transfers investment land (current fair market value of $35,000) that he purchased 10 year ago for $15,000. In exchange, Benjamin receives 30 shares of stock and $5,000 cash. Andrew transfers a machine with a basis of $45,000 and a fair market value of $35,000. Andrew receives 30 shares of stock and $5,000 cash. Emily transfers a rental office building (current fair market value of $45,000) that she purchased 20 years ago for $60,000. Its current basis is $15,000 after recognition of $45,000 in depreciation expense. The corporation assumes the $20,000 balance on the original mortgage and Emily receives 25 shares of stock from the corporation in the exchange. Jackson provided the legal services to organize the corporation (value $5,000) and contributes $10,000 in cash in exchange for 15 shares of stock. How much gain does Emily recognize?

What is the functional-use test in an involuntary conversion?

In a qualified reorganization: