Mr. Beaver and Ms. Duck decide to form a new corporation named BD Inc. Mr. Beaver transfers $20,000 cash, equipment (FMV $40,000; adjusted tax basis $41,500) and business inventory ($20,000 FMV; adjusted tax basis $12,000), and Ms. Duck drafts the legal documents and designs the accounting and information systems for BD. These services are valued at $10,000. BD issues 1000 shares of common stock to its two shareholders. a. How many shares should Mr. Beaver and Ms. Duck each receive? Beaver __________ Duck __________ b. Compute Mr. Beaver’s realized and recognized gain on his exchange of property for stock, and determine his tax basis in his BD common shares. Beaver realized gain ______________ Beaver recognized gain ___________ Beaver’s basis in BD stock _________ c. Compute Ms. Duck’s realized and recognized gain on her exchange of services for stock, and determine her tax basis in her BD common shares. Duck realized gain ______________ Duck recognized gain ___________ Duck’s basis in BD stock _________
Mr. Beaver and Ms. Duck decide to form a new corporation named BD Inc. Mr. Beaver transfers $20,000 cash, equipment (FMV $40,000; adjusted tax basis $41,500) and business inventory ($20,000 FMV; adjusted tax basis $12,000), and Ms. Duck drafts the legal documents and designs the
a. How many shares should Mr. Beaver and Ms. Duck each receive?
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- Beaver __________
- Duck __________
b. Compute Mr. Beaver’s realized and recognized gain on his exchange of property for stock, and determine his tax basis in his BD common shares.
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- Beaver realized gain ______________
- Beaver recognized gain ___________
- Beaver’s basis in BD stock _________
c. Compute Ms. Duck’s realized and recognized gain on her exchange of services for stock, and determine her tax basis in her BD common shares.
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- Duck realized gain ______________
- Duck recognized gain ___________
- Duck’s basis in BD stock _________
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