McGraw-Hill's Taxation of Business Entities 3rd Edition by Connie Weaver, Brian Spilker, Edmund Outslay, John Robinson, Ronald Worsham, Benjamin Ayers, John Barrick

Exercise 51

Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $200,000 in return for 50 percent of the corporation's stock. Hermione contributed a building and land with the following fair market values and tax-adjusted bases in return for 50 percent of the corporation's stock:

To equalize the exchange, Wizard Corporation paid Hermione $50,000 in addition to her stock.
a. What amount of gain or loss does Ron realize on the formation of the corporation What amount, if any, does he recognize
b. What is Ron's tax basis in the stock he receives in return for his contribution of property to the corporation
c. What amount of gain or loss does Hermione realize on the formation of the corporation What amount, if any, does she recognize
d. What is Hermione's tax basis in the stock she receives in return for her contribution of property to the corporation
e. What tax-adjusted basis does Wizard Corporation take in the land and building received from Hermione
Assume Hermione's tax-adjusted basis in the land was $200,000.
f. What amount of gain or loss does Hermione realize on the formation of the corporation What amount, if any, does she recognize
g. What tax-adjusted basis does Wizard Corporation take in the land and building received from Hermione
Assume Hermione's tax-adjusted basis in the land was $250,000.
h. What amount of gain or loss does Hermione realize on the formation of the corporation What amount, if any, does she recognize
i. What tax-adjusted basis does Wizard Corporation take in the land and building received from Hermione
j. What election can Hermione and Wizard Corporation make to allow Wizard Corporation to take a carryover basis in the land