70.2K

Verified Solution

Link Copied!

During the current year, Harry and Ron form Potter Corporation and transfer the following property, each of which has been held long-term:

Transferor	Asset	Transferor's Adjusted Basis	Fair Market Value	Consideration Received
Harry	Cash	$10,000	$10,000	200 shares of Potter stock
Ron	Undeveloped Land	$30,200	$35,200	800 shares of Potter stock and $4,000 cash
	Inventory	$10,300	$8,800

Instructions:

1. 1. Does the exchange qualify as an IRC Sec. 351 non-recognition transaction? Explain whether the exchange meets each of the non-recognition requirements.
2. 2. What are the following tax consequences of the property transfers outlined above for the shareholders, Harry and Ron? Use the space provided below on the next page for supporting calculations.

Harry

• Gain/loss recognized (amount and character): $_____________________
• Basis in Potter stock received: $___________________
• Holding period in Potter stock received: ____________________

Ron

• Gain/loss recognized (amount and character): $_____________________
• Basis in Potter stock received: $___________________
• Holding period in Potter stock received: ____________________

• 3. What are the following tax consequences of the property transfers outlined above for Potter Corporation? Use the space provided below on this page for supporting calculations.
• Gain/loss recognized (amount and character): $____________________
• Basis in land received: $___________________
• Basis in inventory received: $___________________
• Holding period in land received: ____________________
• Holding period in inventory received: ____________________

Answer & Explanation Solved by verified expert

See Answer