Question : 72. Rex and Marsha each own 50 percent of the Grandiflora : 1313629

72. Rex and Marsha each own 50 percent of the Grandiflora Corporation, an S corporation with a calendar tax year. At the beginning of the tax year, Marsha and Rex both have a basis in the stock of the corporation of $25,000. On June 30, 2014, Rex sells his interest in the corporation to George for $200,000, and for 2014 the Grandiflora Corporation has a loss of $90,000. 

a.Calculate the amount of the corporation’s loss that may be deducted by Rex on his 2014 tax return.

b.Calculate the amount of the corporation’s loss that may be deducted by George on his 2014 tax return.

c.Calculate the amount of the corporation’s loss that may be deducted by Marsha on her 2014 tax return.

ANSWER:  a.$22,192 = $45,000 × 180 days/365 days. (Leap year: $22,254 = $45,000 × 181/366)

b.$22,808 = $45,000 × 185 days/365 days. (Leap year: $22,746 = $45,000 × 185/366)

c.

$25,000. Marsha’s share of the corporation’s loss is $45,000; however, her deductible loss is limited to her $25,000 basis in the corporation’s stock.

POINTS:  1

QUESTION TYPE:  Subjective Short Answer

HAS VARIABLES:  False

LEARNING OBJECTIVES:  ITF.WABG.15.LO:11-06 – LO:11-06

73. Fran, George, and Helen form FGH Corporation. In exchange for 300 shares of stock of the corporation, Fran contributes property with a basis of $15,000, fair market value of $50,000 and subject to a liability of $20,000 which the corporation assumed. George contributes property with a basis of $20,000, fair market value of $30,000 in exchange for 250 shares of stock of the corporation with a value of $25,000 plus $5,000 cash. Helen performs services for the corporation and receives $2,000 worth of stock (20 shares) in exchange for the services. 

a.What is the amount of Fran’s recognized gain or loss on the transaction?

b.What is Fran’s basis in the stock of the corporation?

c.What is the corporation’s basis in the property received from Fran?

d.What is the amount of George’s recognized gain or loss on the transaction?

e.What is George’s basis in the stock of the corporation?

ANSWER:  a.$5,000 gain = $20,000 – $15,000

b.$0 = $15,000 + $5,000 – $20,000

c.$20,000 = $15,000 + $5,000

74. Robert, Kim, Tony, and Sharon decided to form the Cash Cow Corporation. In exchange for 40 percent of the stock, Robert contributed an apartment building with a fair market value of $700,000 and subject to a liability of $300,000. Robert’s basis in the apartment building is $225,000. Kim contributed warehouse storage units worth $450,000 in exchange for 40 percent of the stock plus $50,000 in cash from the corporation. Her basis in the warehouse is $125,000. Tony contributed $100,000 cash for 10 percent of the stock. Sharon is performing services worth $100,000 for 10 percent of the stock.a. What is the recognized gain or recognized income for:     1. Robert     2. Kim     3. Tony     4. Sharonb. What is the basis in the stock for:     1. Robert     2. Kim     3. Tony     4. Sharonc. What is the corporation’s basis in:     1. The apartment building     2. The warehouse