Lewis Corporation has two shareholders who are brothers: Ray owns 50% of the stock and Robert owns the remaining 50%. Ray and Robert each have a basis in their stock of $50,000. As of December 31, 20XX, Lewis Corporation owns the following assets: Asset Basis Fair Market Value Cash $30,000 $30,000 Land $12,000 $20,000 Equipment $40,000 $30,000 The land has a liability attached to it of $8,000. It is distributed to Ray on December 31, 20XX, and Ray assumes this liability as part of the distribution. The corporation's earnings and profits (determined before considering the effects of the distributions) are allocable to Ray and Robert as follows: Ray Robert Current Earnings and Profits $10,000 $10,000 Accumulated Earning and Profits $ 25,000 $ 25 D Type your input FORMATTED RESPONSE Part A: How much income must Ray recognize and what is his basis in the land? Reset Cancel Accept Ray's gain/income Basis in land 123 Part B: How much gain must Lewis Corporation recognize on the distribution? Gain from distribution 123
Lewis Corporation has two shareholders who are brothers: Ray owns 50% of the stock and Robert owns the remaining 50%. Ray and Robert each have a basis in their stock of $50,000. As of December 31, 20XX, Lewis Corporation owns the following assets: Asset Basis Fair Market Value Cash $30,000 $30,000 Land $12,000 $20,000 Equipment $40,000 $30,000 The land has a liability attached to it of $8,000. It is distributed to Ray on December 31, 20XX, and Ray assumes this liability as part of the distribution. The corporation's earnings and profits (determined before considering the effects of the distributions) are allocable to Ray and Robert as follows: Ray Robert Current Earnings and Profits $10,000 $10,000 Accumulated Earning and Profits $ 25,000 $ 25 D Type your input FORMATTED RESPONSE Part A: How much income must Ray recognize and what is his basis in the land? Reset Cancel Accept Ray's gain/income Basis in land 123 Part B: How much gain must Lewis Corporation recognize on the distribution? Gain from distribution 123
Chapter9: Acquisitions Of Property
Section: Chapter Questions
Problem 30P
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Transcribed Image Text:Lewis Corporation has two shareholders who are brothers: Ray owns 50% of the stock and Robert owns the remaining 50%. Ray and
Robert each have a basis in their stock of $50,000. As of December 31, 20XX, Lewis Corporation owns the following assets:
Asset
Basis Fair Market Value
Cash
$30,000
$30,000
Land
$12,000
$20,000
Equipment $40,000
$30,000
The land has a liability attached to it of $8,000. It is distributed to Ray on December 31, 20XX, and Ray assumes this liability as part
of the distribution.
The corporation's earnings and profits (determined before considering the effects of the distributions) are allocable to Ray and Robert
as follows:
Ray
Robert
Current Earnings and Profits
$10,000 $10,000
Accumulated Earning and Profits $ 25,000 $ 25 D Type your input
FORMATTED RESPONSE
Part A: How much income must Ray recognize and what is his basis in the land?
Reset
Cancel Accept
Ray's gain/income
Basis in land
123
Part B: How much gain must Lewis Corporation recognize on the distribution?
Gain from distribution
123
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ISBN:
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Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT