Sam and Vera Are Going to Establish a Business

question 21

Essay

Sam and Vera are going to establish a business.Sam will contribute cash of $100,000 for a 50% interest,and Vera will contribute land and a building worth $135,000 (adjusted basis of $65,000)for a 50% interest.The land and building is encumbered by a $35,000 mortgage which the entity assumes.Determine the tax consequences of the contribution to Sam,Vera,and the entity if the business is.

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Definitions:

Calorie

A unit of energy measurement used to quantify the amount of energy derived from food consumed by an organism.

Carbohydrate

Organic compounds, consisting of carbon, hydrogen, and oxygen, that are broken down to release energy in the human body, including sugars, starch, and fiber.

Daily Caloric Intake

The total amount of calories a person consumes in a day, which can vary based on age, gender, activity level, and weight management goals.

Protein

Macromolecules consisting of long sequences of α-amino acids [H2N-CHR-COOH] in peptide (amide) linkage (elimination of H2O between the α-NH2 and α-COOH of successive residues). Protein is three-fourths of the dry weight of most cell matter and is involved in structures, hormones, enzymes, muscle contraction, immunologic response, and essential life functions. The amino acids involved are generally the 20 α-amino acids (glycine, l-alanine) recognized by the genetic code. Cross-links yielding globular forms of protein are often effected through the 2SH groups of two sulfur-containing l-cysteinyl residues, as well as by noncovalent forces (such as hydrogen bonds, lipophilic attractions).