a.
Ascertain person N’s realized and recognized gain (or loss)”.
.
a.
Explanation of Solution
Boot: Realized gain can be recognized by the transferor to the extent the transferors receive property other than stock, is known as boot.
Person N’s has a realized gain of $40,000 (1). Person N’s recognized gain, however, is $10,000, the smaller of realized gain ($40,000) or boot received ($10,000).
Working note:
(1)Calculate the amount of realized gain:
b.
Ascertain person N’s basis in the Corporation E’s stock.
b.
Explanation of Solution
Person N’s basis in the Corporation E’s stock is $230,000 (2).
Working note:
(2) Calculate Person N’s basis:
c.
Ascertain Corporation E’s basis in the inventory.
c.
Explanation of Solution
Corporation E’s basis in the inventory is $240,000 (3).
Working note:
(3)Calculate the Corporation E’ basis:
d.
Ascertain Person C’s realized and recognized gain (or loss).
d.
Explanation of Solution
Person C has a realized loss of $30,000 (4). Person C has no recognized loss, since § 351 disallow losses.
Working note:
(4)Calculate the Person C’s realized loss:
e.
Ascertain Person C’s basis in the Corporation E’s stock.
e.
Explanation of Solution
Person C’s basis in the Corporation E’s stock is $380,000 (5).
Working note:
(5)Calculate Person C’s basis in the Corporation E’s stock:
f.
Ascertain Corporation E’s basis in the machinery and equipment.
f.
Explanation of Solution
Corporation E’s basis in the machinery and equipment is $400,000 (Courtney’s basis).
g.
Ascertain Person Z’s realized and recognized gain (or loss)
g.
Explanation of Solution
Person Z has a realized gain of $30,000 (6). Person Z’s recognized gain is also $30,000, the lesser of realized gain of $30,000 or boot received of $100,000.
Working note:
(6)Calculate the amount of realized gain:
h.
Ascertain Person Z’s basis in the Corporation E’s stock.
h.
Explanation of Solution
Person Z’s basis in the Corporation E’s stock is $1,200,000(7).
Working note:
(7)Calculate Person Z’s basis:
i.
Ascertain Corporation E’s basis in the land and building.
i.
Explanation of Solution
Corporation E’s basis in the land and building is $1,300,000.
Working note:
Calculate Corporation E’s basis:
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Chapter 20 Solutions
South-Western Federal Taxation 2019: Individual Income Taxes (Intuit ProConnect Tax Online 2017 & RIA Checkpoint 1 term (6 months) Printed Access Card)
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