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31 Oct 2018

John transfers property to ABC corporation in a §351 exchange. The property transferred was real estate previously used in John’s business. John held the real estate for 8 months prior to transferring the real estate to the corporation in the §351 exchange. What is John’s holding period of his ABC stock on the date of the §351 transfer?

A. 0

B. 1 Day

C. 8 Months

D. None of the above

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3 Nov 2018

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Jack and Jill Uphill are the shareholders of JJ Art, Inc., an S corporation which conducts business as an art gallery in Miami Beach, FL. The corporation was formed in 1986, and the corporation has always been an S corporation. JJ Art, Inc. also owns the real estate used in the business. Jill inherited the land from her grandfather upon his death in 1985, and she transferred the property to the corporation solely in exchange for stock of the corporation in a nonrecognition transaction to which Code Section 351 applied. Her grandfather had purchased the real estate for $10,000 many years earlier. The fair market value of the property as finally determined for federal estate tax purposes upon her grandfather’s death was $300,000. The real property was then unencumbered and remains so today. The real estate consists of the land and a free standing building with a total fair market value of $4,000,000. The corporation’s total basis in the real estate (land and building) on the date of distribution is $20,000. On January 20, 2017, JJ Art, Inc. adopted a plan of complete liquidation, and on February 20, JJ Art., Inc. distributed the real estate pro rata to its two shareholders. How much gain or loss, if any, was realized and recognized by the corporation as a result of the distribution of the real estate to Jack and Jill?

a.0, because this is an S corporation.

b. $280,000.

c. $3,980,000.

d. 0, because this is a distribution to the individual shareholders in liquidation of the corporation.

My answer is (b) 280,000. Am I on the right track? If not can you tell me what answer you derived at and how.

Zhang incorporated her sole proprietorship by transferringinventory, a building, and land to the corporation in return for100 percent of the corporation’s stock. The property transferred tothe corporation had the following fair market values and taxbases:

FMV Tax Basis

Inventory $ 20,000 $ 10,000

Building 150,000 100,000

Land 230,000 70,000

Total $ 400,000 $ 180,000

The corporation also assumed a mortgage of $200,000 attached tothe building and land. The fair market value of the corporation’sstock received in the exchange was $220,000. The exchange met therequirements to be tax-deferred under §351.

. What amount of gain does Zhangrecognize on the transfer of the property to hercorporation?

Jorge contributed land he held as an investment (fair marketvalue $117,000; basis $58,750) and inventory (fair market value$72,500; basis $57,750) to ABC Corporation in exchange for 50percent of the ABC stock (30 shares valued at $114,000) and $75,500cash in a qualifying §351 exchange. (Do not roundintermediate calculations. Round your final answers to the nearestdollar amount.)

a-1. What amount of gain does Jorge recognizeon the exchange?

a-2. What is the character of the gain?

a-3. What would be Jorge's basis in his ABCstock after the exchange?

b. Assume the same facts except that Jorgereceived $75,500 of business property from ABC instead of $75,500cash. What is the amount and character of gain Jorge wouldrecognize on the exchange?

c. Assume the original facts in this exampleexcept that the inventory had an adjusted basis of $83,850 so thatJorge realized a $11,350 loss on the inventory (he still realized a$58,250 gain on the land). How much gain or loss would he recognizeon the exchange?

Please answer all questions and please show work. Thanks somuch.

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