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Fella
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Joined: 19 Nov 2011
Location: United States
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Posts: 68
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| Posted: 14 Aug 2012 at 16:22 | IP Logged
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Okay, so far I thought I understood what realized and
recognized gains of shareholders are. But, this question
totally threw me off:
three shareholders form a corp. A,B,C. A performs
services for $25K and received 30 shares, B gives land
with adj. basis of $10K and FMV of $100K and received 60
shares, C gives cash for $10K and receives 10 shares.
What amount of income would they recognize?
answer: A $25K, B 90K (100-10) and C $0
The explanation says that Sec. 351 does not apply and
therefore these are their RECOGNIZED gains. What????
I thought that recognized gain is lesser of received boot
(or assumed liabilities by corp if it's more than asset's
adj. basis) OR realized gain.
A and C are OK but why does B have to recognize a GAIN of
90K???
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mukhya
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Joined: 02 Apr 2011
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| Posted: 14 Aug 2012 at 23:31 | IP Logged
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I think B's 90k would be (built in kind) gain which he will
recognized when Corp sells that Property.
B's recognized gain would be 0.
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Fella
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Joined: 19 Nov 2011
Location: United States
Online Status: Offline
Posts: 68
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| Posted: 16 Aug 2012 at 14:24 | IP Logged
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mukhya, I think that the 90K should not be recognized as a
gain at all, just like you said. I am wondering why the
answer says that it needs to be recognized
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Topic: What?????????????
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