Forming a Corporation
Response to the following problem:
Howard and Todd form a corporation. Howard contributes $25,000 cash in exchange for 1,000 shares of stock. Todd performs services worth $25,000 in exchange for 1,000 shares of stock.
a. How much gain or loss do Howard, Todd, and the corporation recognize on the transfer?
b. What is Howard's basis in his shares of stock in the corporation?
c. What is Todd's basis in his shares of stock in the corporation?