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Realization of Gain or Loss

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Ramon incorporated his 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:
FMV Tax-Adjusted Basis
Inventory $ 10,000 $ 4,000
Building 50,000 30,000
Land 100,000 50,000
Total $160,000 $84,000

The fair market value of the corporation's stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Ramon.
a. What amount of gain or loss does Ramon realize on the transfer of the property to his corporation?
b. What amount of gain or loss does Ramon recognize on the transfer of the property to his corporation?
c. What is Ramon's basis in the stock he receives in his corporation?

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Solution Summary

This solution provides assists with the accounting problems regarding realization of gain or loss.

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Question A
Realized gain = $160,000 - $84,000 = 76,000
The gain from the sale or other disposition of property shall be the excess of the amount realized therefrom over the adjusted basis provided in section 1011 ...

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