Explore BrainMass

Explore BrainMass

    Alice and Joe are going to form a business entity. Alice wil

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Alice and Joe are going to form a business entity. Alice will contribute cash of $200,000 for a 40% ownership interest, and Joe will contribute land worth $300,000 for a 60% ownership interest. Joe's basis for the land is $180,000. Which of the following statements is correct?

    a. If the entity is a C corporation, Alice has $0 recognized gain and a basis for her stock of $200,000, and Joe has a recognized gain of $120,000 and a basis for his stock of $300,000.
    b. If the entity is an S corporation, Alice has $0 recognized gain and a basis for her stock of $200,000, and Joe has $0 recognized gain and a basis for his stock of $180,000.
    c. If the entity is a general partnership, Alice has $0 recognized gain and a basis for her partnership interest of $152,000 ($380,000 ï?´ 40%), and Joe has $0 recognized gain and a basis for his partnership interest of $228,000 ($380,000 ï?´ 60%).
    d. Only a and c are correct.
    e. a, b, and c are correct.

    © BrainMass Inc. brainmass.com June 4, 2020, 1:23 am ad1c9bdddf
    https://brainmass.com/business/financial-statements/alice-and-joe-are-going-to-form-a-business-entity-alice-wil-397381

    Solution Preview

    Alice and Joe are going to form a business entity. Alice will contribute cash of $200,000 for a 40% ownership interest, and Joe will contribute land worth $300,000 for a 60% ownership interest. Joe's basis for the land is $180,000. Which of the ...

    Solution Summary

    Alice and Joe are going to form a business entity. Alice will contribute cash of $200,000 for a 40% ownership interest, and Joe will contribute land worth $300,000 for a 60% ownership interest. Joe's basis for the land is $180,000. Which of the following statements is correct?

    $2.19

    ADVERTISEMENT