Antoine, Becky, and Colleen form ABC Corporation by contributing the following items in exchange for stock in ABC Corporation: Adjusted Basis Fair Market Value of property given of property given Shares of Stock Received Antoine: Cash $ 30,000 $30,000 Equipment 300,000 420,000 4500 shares Becky: Land $100,000 $480,000 3000 shares* Mortgage 150,000 (150,000) Colleen: Services $0 $ 50,000 500 shares Additional information: Colleen has a PhD in computer technology and designed their online platform. *Becky received $30,000 of cash in addition to 3,000 shares of ABC Stock.
Antoine, Becky, and Colleen form ABC Corporation by contributing the following items in exchange for stock in ABC Corporation:
Adjusted Basis Fair Market Value
of property given of property given Shares of Stock Received
Antoine:
Cash $ 30,000 $30,000
Equipment 300,000 420,000 4500 shares
Becky:
Land $100,000 $480,000 3000 shares*
Mortgage 150,000 (150,000)
Colleen:
Services $0 $ 50,000 500 shares
Additional information:
- Colleen has a PhD in computer technology and designed their online platform.
*Becky received $30,000 of cash in addition to 3,000 shares of ABC Stock.
Questions:
- What basis does ABC corporation have in:
- Equipment (contributed by Antoine)
- Land (contributed by Becky
- New scenario: Assume that the services performed by Colleen were valued at $500,000; therefore, Colleen received 5,000 shares of stock. Thus, ownership would now be:
Antoine 4,500 shares
Becky 3,000 shares
Colleen 5,000 shares
Under this new scenario:
- How much gain, loss, or income would Antoine recognize?
- How much basis would Antoine have in ABC stock?
- In one or two sentences, explain why the answers under the new scenario (i.e. when Colleen’s services are more highly valued) are different from the original problem.
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