Calculate basis in Pine Corporation for 4 shareholders
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Sam, Carl, Lucy and Sylvia form Pine Corporation with the Following considerations:
Basis to Fair Market Number of
Transferor Value shares Issued
From Sam
Inventroy 30,000 96,000 30 *
From Carl
Equipment ($30000 of
depreciation taken by
Carl in previous years)45,000 99,000 30 **
From Lucy
Secret process 15,000 90,000 30
From Sylvia
Cash 30,000 30,000 10
* Sam received $6000 cash in addition to the 30 shares
** Carl received $9,000 cash in additon to the 30 shares
Assume the value of each share of Pine corporatin stock is $3,000. As to these tansctions,
provide the following information:
a. Sam's recognized gain or loss. Identify the treatment given to any sch gain or loss
b. Sam's basis in the Pine stock.
c. Pine Corporation's basis in the inventory
d. Carl's reconized gain or loss and its classification
e. Carl's basis in the Pine stock
f. Pine's Corporation's basis in the equipment
g. Lucy's recognized gain or loss
h. Lucy's basis in the Pine Stock
i. Pine Corporation's basis in the secret process
j. Sylvia's recognized gain or loss
k. Sylvia's basis in Pine stock
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Solution Summary
The solution provides a detailed explanation of the basis in Pine Corporation for each of the shareholders under Section 351 as compared to a transfer to a non-controlled corporation.
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