# Accounting

Let us assume that Carla incorporated her sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation's stock. The property transferred to the corporation had the following fair market values and tax-adjusted bases.

Inventory \$ 20,000 \$ 10,000
Building 150,000 100,000
Land 250,000 300,000
Total \$ 420,000 \$ 410,000

The corporation also assumed a mortgage of \$120,000 attached to the building and land. The fair market value of the corporation's stock received in the exchange was \$300,000.

a. What amount of gain or loss does Carla realize on the transfer of the property to his corporation?

b. What amount of gain or loss does Carla recognize on the transfer of the property to her corporation?

c. What is Carla's basis in the stock she receives in his corporation?

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Jingying Zhou, MA (IP)

Rating 4.8/5

Active since 2010

BA, Fudan University
MA (IP), University of Michigan

Responses 349

Comments on Jingying's work:

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"Thanks. I really appreciate your help."

"Hi! I am not entirely sure how the table was constructed. What equations were used to find NPV, payback, PI, and IRR? Thank you! Wonderful job. :) I just needed to deconstruct it and study it for the exam and the core equations would help tremendously."

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"You are good at what you do but some more explanation would have been greatly appreciated."