Rita Forms Finch Corporation by Transferring Land (Basis of $125,000;

question 18

Essay

Rita forms Finch Corporation by transferring land (basis of $125,000; fair market value of $750,000) which is subject to a mortgage of $375,000. Two weeks prior to incorporating Finch, Rita borrows $125,000 for personal purposes
and gives the lender a second mortgage on the land. Finch Corporation issues stock worth $250,000 to Rita and assumes the two mortgages on the land. What are the tax consequences to Rita and to Finch Corporation?

---

Definitions:

Disrupts

Acts or occurrences that interrupt the usual order or continuity of processes, often causing disturbance or dysfunction.

Electroconvulsive Therapy

A psychiatric treatment involving the induction of seizures through electrical currents to the brain, used primarily to treat severe depression.

Long-Term Memories

Memories that can be retained for long periods, often throughout an individual's life, encompassing facts, experiences, and skills.

Procedural Memories

Memories of motor skills and actions that have been learned previously and can be performed without conscious thought, as part of an individual's implicit memory.