MrAnd MrsMeredith Own a Sole Proprietorship Consisting of Business Assets with with a $649,000

question 26

Essay

Mr.and Mrs.Meredith own a sole proprietorship consisting of business assets with a $649,000 aggregated adjusted tax basis.According to an independent appraisal,the business is worth $2 million.The Merediths are planning to transfer the entire business to Molleri Inc.in exchange for 20,000 shares of Molleri stock.How much gain will the Merediths recognize on the exchange of business assets for stock and what basis will they take in the stock if:
a.Molleri has 23,000 shares of outstanding stock immediately after the exchange?
b.Molleri has 500,000 shares of outstanding stock immediately after the exchange?

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Definitions:

Cognitive

Pertaining to the mental processes involved in acquiring knowledge and understanding through thought, experience, and the senses.

Affective

Relating to moods, feelings, and attitudes; typically describes phenomena that influence emotions.

Behavioral

Pertaining to the actions or reactions of a person or animal in response to external or internal stimuli.

Coalition Resources

Assets or support that groups combine to achieve a common goal.