Fran, George, and Helen Form FGH Corporation

question 40

Essay

Fran, George, and Helen form FGH Corporation. In exchange for 300 shares of stock of the corporation, Fran contributes property with a basis of $15,000, fair market value of $50,000 and subject to a liability of $20,000 which the corporation assumed. George contributes property with a basis of $20,000, fair market value of $30,000 in exchange for 250 shares of stock of the corporation with a value of $25,000 plus $5,000 cash. Helen performs services for the corporation and receives $2,000 worth of stock (20 shares) in exchange for the services.
a.What is the amount of Fran's recognized gain or loss on the transaction?
b.What is Fran's basis in the stock of the corporation?
c.What is the corporation's basis in the property received from Fran?
d.What is the amount of George's recognized gain or loss on the transaction?
e.What is George's basis in the stock of the corporation?

---

Definitions:

Ingroup Bias

The tendency to favor and extend better treatment to members of one's own group over those of other groups.

Outgroup Homogeneity

The perception that members of an outgroup are more similar to each other than they actually are, or more similar than members of the ingroup.

Uncertainty-Identity Theory

The theory that people join and identify with groups in order to reduce negative feelings of uncertainty about themselves and others.

Entitativity

The degree to which a group is perceived as being a coherent and distinct entity, with members sharing common characteristics or a common fate.