Mike and Jim decide to form a C-Corp. Mike contributes inventory with a FVM of...
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Accounting
Mike and Jim decide to form a C-Corp. Mike contributes inventory with a FVM of $100,000 in return for 75% of the company stock. Mike's tax basis in the inventory is $50,000. Jim contributes his legal services for the formation with a FMV of $5,000 in return for 25% of the company stock.
a) What amount of gain does Mike recognize in the transaction?
b) What amount of gain goes Mike realize in the transaction?
c) What is Mike's tax basis in the stock he received?
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