ABC S-Corporation had $200,000 of ordinary income in 2013 Abe an 80% owner contributes White Machine in an IRC Section 351 transaction on 1/10/13 the machine had a FMV $8,000 and basis to him of $3,000 Bob a 10% owner contributes Blue Machine in the same IRC section 351 transaction on 1/10/13 the machine had a FMV of $1,000 and basis to him of $5,000.
Abe sells Red Machine to ABC S-Corp for $1000 on 11/5/13 his adjusted basis is $100 at the time of the sale Carl a 10% owner sells Green Land to ABC S-Corp for $100,000 on 6/1/13 his adjusted basis in the land is $25,000 at the time of the sale.
- ABC S-Corp buys Grey machine for $300,000 from a third party on 7/1/13
- ABC S-Corp buys Orange Machine for $90,000 from a third party on 12/31/13
- ABC S-Corp buys Yellow machine for $90,000 from a third party on 11/5/13
- Assume all of the above assets are placed in service on the date of acquisition except for Orange Machine which is placed in service on 1/5/14.
Assume Abe and Bob work in the S-Corp business and have salaries of $10,000 each. Carl does not work in the S-Cor. Carl has sole proprietorship with income of $15,000 and no property placed in service under IRC Section 179.Type a tax memorandum and determine the amount and treatment of the IRC Section 179 deduction for the S-Corp and all shareholders.