Fred, Barney, and Wilma form Hard Rock, Inc., to manufacturegravel. They contribute the following in exchange for equal sharesof stock:
Shareholder Property FMV AB
Fred Cash $50,000 $50,000
Property $50,000 $5,000
Debt $10,000
Barney Stocks $90,000 $80,000
Wilma Equipment $90,000 $45,000
Betty also provides accounting services in exchange for 10% ofthe stock.
Fred and Wilma are married, as are Barney and Betty.
1. What are the tax consequences to Fred?
2. What are the tax consequences to Barney?
3. What are the tax consequences to Wilma?
4. What are the tax consequences to Betty?
5. What basis will Fred take in the stock?
6. What basis will Barney take in the stock?
7. What basis will Wilma take in the stock?
8. What basis will Betty take in the stock?
