7. Elizabeth, Rod, June and Whit form Zelcova Corporation with the following con
ID: 2334686 • Letter: 7
Question
7. Elizabeth, Rod, June and Whit form Zelcova Corporation with the following consideration:
CONSIDERATION TRANSFERRED
Basis to Transferor
Fair Market Value
Number of Shares Issued
From Elizabeth –
Personal services rendered to
Zelcova Corporation
$0
$30,000
30
From Bob –
Equipment
$345,000
300,000
300
From June -
Cash
Unrealized accounts receivable
60,000
0
60,000
90,000
130*
From Whit –
Land and building
Mortgage on land and building
210,000
300,000
450,000
300,000
150
*June receives $20,000 in cash in addition to the 130 shares.
Zelcova Corporation assumes the mortgage transferred by Whit. The value of each share of Zelcova stock is $1,000.
As to these transactions, provide the following information:
a. Elizabeth’s recognized gain or loss.
b. Elizabeth’s basis in the Zelcova stock.
c. Bob’s recognized gain or loss.
e. Corporation’s basis in the equipment.
f. June’s recognized gain or loss.
g. June’s basis in the Zelcova stock.
h. Zelcova Corporation’s basis in the unrealized receivables.
i. Whit’s recognized gain or loss.
j. Whit’s basis in the Zelcova stock.
k. Zelcova Corporation’s basis in the land and building.
Basis to Transferor
Fair Market Value
Number of Shares Issued
From Elizabeth –
Personal services rendered to
Zelcova Corporation
$0
$30,000
30
From Bob –
Equipment
$345,000
300,000
300
From June -
Cash
Unrealized accounts receivable
60,000
0
60,000
90,000
130*
From Whit –
Land and building
Mortgage on land and building
210,000
300,000
450,000
300,000
150
Explanation / Answer
a.
Elizabeth's recognized gain is $30000 ordinary gain
b.
Elizabeth’s basis in the Zelcova stock is $30000
c.
Bob's recognised gain is $0.The basis for the loss of assets must be reduced by the amount of the net built in loss in proportion to the asset's share in loss.
e.
Corporation's basis in the equipment is $300000.
f.
June's recognized gain is $20000 in ordinary gain.
g.
June's basis in zelcova stock is $130000
h.
Zelcova's basis in unrealized receivables is 90000
i.
Whit's recognised loss equals 450000 - 210000 - 150000 = $90000
j.
Whit's basis is 150000
k.
Zelcova's basis in land and building is 450000
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