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Chapter 19 Corporate Organization Exercise Kathy and Carl formed a corporation by each contributing an asset with a FMV of $50,000 for half of the stock in the corporation. Prior to the transfer, Kathy had an adjusted basis of $40,000 in her asset and Carl had an adjusted basis of $60,000 in his asset. a. Does this exchange qualify for 351 treatment? Why? b. What is Kathy's realized gain on the transaction? c. What is Kathy's recognized gain on the transaction? d. What is Kathy's basis in her stock? e. What is the corporation's basis in Kathy's asset? f. What would Kathy's recognized gain/loss be if she sold her stock for $50,000? g. What would the corporation's recognized gain/loss be if it sold her asset for $50,000? Does Carl have any positive or negative consequences if the corporation sells Kathy's asset for $50,000? Quantify the impact assuming the corporation's marginal tax rate is 21%. h. Answer the following assuming Carl and the corporation did not make the election i. What is Carl's realized loss on the transaction? j. What is Carl's recognized loss on the transaction? k. What is Carl's basis in his stock? 1. What is the corporation's basis in Carl's asset? n. What would Carl's recognized gain loss be if he sold his stock for $50,000? n. What would the corporation's recognized gain/loss be if it sold his asset for $50,0003 Does Kathy have any positive or negative consequences if the corporation sells Carl's o. asset for $50,000? Quantify the impact assuming the corporation's marginal tax rate is 21%. Answer the following assuming Carl and the corporation did make the election p. What is Carl's realized loss on the transaction? q. What is Carl's recognized loss on the transaction? r. What is Carl's basis in his stock? s. What is the corporation's basis in Carl's asset? t. What would Carl's recognized gain/loss be if he sold his stock for $50,000? What would the corporation's recognized gain/loss be if it sold his asset for $50,000? u. Does Kathy have any positive or negative consequences if the corporation sells asset for $50,000? Quantify the impact assuming the corporation's marginal tax rate is 21%. v. Carl's

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