Elizabeth, Rod, June, and Whit form Zelcova Corporation with the following consideration:
|
|
Basis to |
Fair Market |
Number of |
|
From Elizabeth— |
|
|
|
|
Personal services rendered to |
|
|
|
|
Zelcova Corporation |
$ –0– |
$ 30,000 |
30 |
|
From Rod— |
|
|
|
|
Equipment |
345,000 |
300,000 |
300 |
|
From June— |
|
|
|
|
Unrealized accounts receivable |
–0– |
150,000 |
130* |
|
From Whit— |
|
|
|
|
Land and building |
210,000 |
450,000 |
|
|
Mortgage on land and building |
300,000 |
300,000 |
150 |
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, income, or loss. Identify the nature of any such gain, income, or loss.
b. Elizabeth’s basis in the Zelcova stock.
c. Rod’s recognized gain or loss. Identify the nature of any such gain or loss.
d. Rod’s basis in the Zelcova stock. What election may Rod consider making as to his stock basis because the property he contributes to Zelcova has a built in loss?
e. Zelcova Corporation’s basis in the equipment. What is the impact to Zelcova if Rod makes the election noted in part (d) above?
f. June’s recognized gain or loss. Identify the nature of any such 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. Identify the nature of any such gain or loss.
j. Whit’s basis in the Zelcova stock.
k. Zelcova Corporation’s basis in the land and building.