Zoe Ann Transfers Machinery Having a $36,000 Adjusted Basis and a $70,000

question 105

Essay

Zoe Ann transfers machinery having a $36,000 adjusted basis and a $70,000 FMV for all 100 shares of Zeema Corporation's stock. Before the transfer, Zoe Ann used the machinery in her business. She originally paid $50,000 for the machinery and claimed $14,000 of depreciation before transferring the machinery. Zoe Ann recaptures no depreciation on the transfer and the recapture potential is transferred to Zeema Corporation. Zeema sells the machine for $66,000 after it had depreciated the machine an additional $4,000. What is Zeema's gain on the machine and what is its character?

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Definitions:

Comparative Reasoning

The process of making judgments or drawing conclusions based on the comparison of different entities or scenarios.

False Sense

An incorrect or mistaken impression of understanding or belief.

Comparative Inferences

The process of drawing conclusions based on the comparison of two or more entities or situations.

Emotionally Rewarding

Describes an experience or action that brings satisfaction, happiness, or a positive emotional response.