Phillip incorporated his sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation's stock. The property transferred to the corporation had the following fair market values and tax-adjusted bases.
The fair market value of the corporation's stock received in the exchange was $400,000. The transaction met the requirements to be tax-deferred under §351.
a. What amount of net gain or loss does Phillip realize on the transfer of the property to his corporation?
b. What amount of gain or loss does Phillip recognize on the transfer of the property to his corporation?
c. What is the corporation's adjusted basis in each of the assets received in the exchange?
Definitions:
Return On Investment
A metric utilized to assess the effectiveness or return on investment (ROI) or to compare the performance of various investments.
Interest Expense
The cost incurred by an entity for borrowing funds, typically calculated as a percentage of the principal loan amount.
Segment Performance
An evaluation of the results of a particular business segment's operations, often used to assess its profitability and efficiency.
Margin
A financial metric indicating the percentage of revenue that remains after subtracting the cost of goods sold; a measure of profitability.
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