Sam and Trang Are Going to Establish a Business

Essay

Sam and Trang are going to establish a business. Sam will contribute cash of $100,000 for a 50% interest, and Trang will contribute land and a building worth $135,000 adjusted basis of $65,000) for a 50% interest. The land and building are encumbered by a $35,000 mortgage, which the entity assumes. Determine the tax consequences of the contribution to Sam, Trang, and the entity if the business is:
a. An S corporation.
b. A partnership.
c. A C corporation.