, is engaged in a service business. In the current year, Sean incorporates his business by forming Farm Corporation. In exchange for (a) all of its stock (FMV $1,200,000) and (b) Aqua’s note payable of $300,000, Farm Corporation receives Sam’s business assets (basis of $600,000 and fair market value of $1.5 million). a. Does Sean recognize
, is engaged in a service business. In the current year, Sean incorporates his business by forming Farm Corporation. In exchange for (a) all of its stock (FMV $1,200,000) and (b) Aqua’s note payable of $300,000, Farm Corporation receives Sam’s business assets (basis of $600,000 and fair market value of $1.5 million). a. Does Sean recognize
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter12: Corporations: Organization, Capital Structure, And Operating Rules
Section: Chapter Questions
Problem 10P
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Question
Sam, a sole proprietor, is engaged in a service business. In the current year, Sean incorporates his business by forming Farm Corporation. In exchange for (a) all of its stock (FMV $1,200,000) and (b) Aqua’s note payable of $300,000, Farm Corporation receives Sam’s business assets (basis of $600,000 and fair market value of $1.5 million).
a.
Does Sean recognize any gain on the incorporation? Explain.
b.
What basis does Sean have in the Aqua stock?
c.
What basis does Aqua Corporation have in the assets it receives?
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