Adams, Smith, Jones and the XYZ Corp. transfer appreciated property of equal value to Newco. Adams, Smith and XYZ Corp. receive 25 shares each of common stock worth $25,000. Jones received a debt instrument maturing in 15 years with a face value of $25,000. Assume each of the participants has a basis in the assets transferred equal to $5,000. What are the tax consequences to the transferors and Newco?
Adams, Smith, Jones and the XYZ Corp. transfer appreciated property of equal value to Newco. Adams, Smith and XYZ Corp. receive 25 shares each of common stock worth $25,000. Jones received a debt instrument maturing in 15 years with a face value of $25,000. Assume each of the participants has a basis in the assets transferred equal to $5,000. What are the tax consequences to the transferors and Newco?
Chapter4: Corporations: Organization And Capital Structure
Section: Chapter Questions
Problem 38P
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Adams, Smith, Jones and the XYZ Corp. transfer appreciated property of equal value to
Newco. Adams, Smith and XYZ Corp. receive 25 shares each of common stock worth
$25,000. Jones received a debt instrument maturing in 15 years with a face value of
$25,000. Assume each of the participants has a basis in the assets transferred equal to
$5,000. What are the tax consequences to the transferors and Newco?
Expert Solution
Step 1
Calculation of tax consequences to the transferors.
Notes:-
No tax consequence would arise for the newco as there has been no sale except for issue of shares and consideration received for the same which is not a taxable event.
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