Compute the total tax on the gain and distribution


Problem:

For the corporation's basis of $40,000, since corporations don't get stepped-up basis, however I am not sure if that is right. Parts (2) - (4) I really don't have a clue (was eric's basis $100,000 or $125,000?), and would appreciate help from a qualified professional.

Problem: Eric transferred property with a basis of $100,000 and a fair market value of $125,000 to his 100% controlled corporation. The property was subject to a note payable to the bank for $60,000. Compute the following:

1. The corporation's basis in the property.

2. Eric's basis in the stock.

3. When the corporation was in the 22% marginal tax bracket, the corporation sold the property contributed by Eric for $125,000 and distributed to Eric an amount equal to the after tax gain. Eric was in the 20% marginal tax bracket. Compute the total tax on the gain and distribution.

4. What is the corporation's basis in the property assuming Eric's basis was $100,000 and its fair market value was $80,000 at the time that Eric made the transfer for stock?

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Accounting Basics: Compute the total tax on the gain and distribution
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