Zoe Ann Transfers Machinery Having a $36,000 Adjusted Basis and a $70,000

question 105

Essay

Zoe Ann transfers machinery having a $36,000 adjusted basis and a $70,000 FMV for all 100 shares of Zeema Corporation's stock. Before the transfer, Zoe Ann used the machinery in her business. She originally paid $50,000 for the machinery and claimed $14,000 of depreciation before transferring the machinery. Zoe Ann recaptures no depreciation on the transfer and the recapture potential is transferred to Zeema Corporation. Zeema sells the machine for $66,000 after it had depreciated the machine an additional $4,000. What is Zeema's gain on the machine and what is its character?

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Definitions:

Innate Skill

A natural ability or talent that an individual is born with, as opposed to skills developed through learning or training.

Manipulating

Involves exerting shrewd or devious influence especially for one’s own advantage.

Great Leader Theory

A leadership theory that suggests certain individuals possess inherent traits or characteristics that make them exceptionally effective leaders.

Zeitgeist Theory

A theory suggesting that the dominant set of ideals, beliefs, and mores of a society reflects its spirit or intellectual and cultural climate at any given time.