Suppose SPA Corp

question 83

Essay

Suppose SPA Corp. was formed by Sara Inc. (a C corporation that is 100% owned by Sara) and Sara's friend Tyson. In exchange for 50% of the stock of SPA, Sara contributed $100,000. In exchange for the remaining 50% of the SPA stock, Tyson contributed a building with a fair market value of $100,000 and an adjusted tax basis of $60,000. How much gain is Tyson required to recognize on the contribution? Is SPA eligible to elect S corporation status?

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Definitions:

Budget Line

This line delineates the combos of two goods a consumer can procure, given their income and the goods' prices, demonstrating the trade-offs and opportunity costs within their budget.

Consumption

The use of goods and services by households or individuals, often measured to understand economic activity and consumer behavior.

Bushels

A unit of volume measure used primarily for agricultural products, with the size varying by product.

Investment

The allocation of resources, usually financial, in the expectation of generating an income or profit, including purchases of financial instruments or capital assets.