Seth, Pete, Cara, and Jen form Kingfisher Corporation with the following consideration:
Consideration Transferred
|
|
Basis to Transferor
|
Fair Market Value
|
Number of Shares Issued
|
|
From Seth-Inventory
|
$30,000
|
$96,000
|
30*
|
|
From Pete-Equipment ($30,000 of depreciation taken by Pete in prior years)
|
45,000
|
99,000
|
30**
|
|
From Cara-Proprietary process
|
15,000
|
90,000
|
30
|
|
From Jen-Cash
|
30,000
|
30,000
|
10
|
Assume that the value of each share of Kingfisher stock is $3,000. As to these transactions, provide the following information:
a. Seth's recognized gain or loss. Identify the nature of any such gain or loss.
b. Seth's basis in the Kingfisher Corporation stock.
c. Kingfisher Corporation's basis in the inventory.
d. Pete's recognized gain or loss. Identify the nature of any such gain or loss.
e. Pete's basis in the Kingfisher Corporation stock.
f. Kingfisher Corporation's basis in the equipment.
g. Cara's recognized gain or loss.
h. Cara's basis in the Kingfisher Corporation stock.
i. Kingfisher Corporation's basis in the proprietary process.
j. Jen's recognized gain or loss.
k. Jen's basis in the Kingfisher stock.