Exam 2: Corporate Formations and Capital Structure

Mario and Lupita form a corporation in a transaction coming under Sec.351.Lupita transfers property with an adjusted basis of $150,000 and an FMV of $200,000 in exchange for one-half of the stock.The property has an $80,000 mortgage,which the corporation assumes.Lupita has a recognized gain of

The transferor's basis for any noncash boot property received in a Sec.351 transaction is the boot's FMV reduced by any unrecognized gain.

S corporations are flow-through entities in which S income is allocated to shareholders.

Identify which of the following statements is true.

If a corporation's total adjusted bases for all properties transferred exceed the total FMV of the properties,the corporation's bases in the property is limited to FMV if no election is made.

Identify which of the following statements is false.

Which of the following statements is true?

Carolyn transfers property with an adjusted basis of $50,000 and an FMV of $60,000 in exchange for Prime Corporation stock in a Sec.351 transaction.Carolyn's basis in the stock is

Yenhung,who is single,forms a corporation using a tax-free asset transfer,which qualifies under Sec.351.She contributes property having an adjusted basis of $50,000 and an FMV of $40,000.The stock received from the corporation is Sec.1244 stock.When Yenhung sells the stock for $30,000,her loss is

The City of Portland gives Data Corporation $60,000 cash and land worth $100,000 to induce it to move.The cash was not spent during the 12 months following contribution.The contribution results in

Chris transfers land with a basis of $40,000 to Webb Corporation in exchange for 100% of Webb's stock.At the date of the transfer,the land had a $30,000 fair market value.Absent an election by Chris,Webb's basis in the land is

A medical doctor incorporates her medical practice,which is operated as a sole proprietorship.The proprietorship uses the cash method of accounting.Among the assets contributed to the new corporation are unrealized receivables worth $40,000.The receivables are collected by the corporation.Which of the following statements is correct?

Jerry transfers two assets to a corporation as part of a Sec.351 exchange.The first asset has an adjusted basis of $70,000 and an FMV of $50,000.The second asset has an adjusted basis of $70,000 and an FMV of $150,000.The FMV of the stock received is $180,000,and he also receives $20,000 cash.The realized and recognized gain on the second asset is

Identify which of the following statements is true.

Mr.Big,a nonshareholder,who is not a customer,potential customer,governmental entity,or civic group,contributes $60,000 cash and land worth $100,000 to induce Carrie Corporation to relocate to his municipality.Carrie Corporation spent $50,000 of the cash within the first 12 months of his contribution to purchase machinery.The contribution results in

Identify which of the following statements is true.

Max transfers the following properties to a newly created corporation for $90,000 of stock and $10,000 cash in a transaction that qualifies under Sec.351. Asset One Asset Two Asset Three FMV \ 30,000 \ 45,000 \ 25,000 Basis 35,000 40,000 20,000 Max's recognized gain is

Upon formation of a corporation,its assets have the same bases for book and tax purposes.

Colleen operates a business as a sole proprietorship.She purchased a computer for $10,000 last year.The computer is five-year recovery property for MACRS purposes and is depreciated under the regular MACRS rules.This year,Colleen incorporates the business and transfers the computer to the new corporation on July 20.The depreciation on the computer for this year allocable to the sole proprietorship is

Three members form an LLC in the current year.Which of the following statements is incorrect?