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:

Standard Deviation

A measure of the amount of variation or dispersion of a set of values; a low standard deviation indicates that the values tend to be close to the mean.

Sampling Distribution

The probability distribution of a given statistic based on a random sample.

Chi-square Distribution

A probability distribution commonly used in statistical significance tests.

Quantity

A property that can exist as a multitude or magnitude, often measured and expressed as a number.