Answer:
1. Mr Boyd's share = 400, Ms Tuck = 800
2. Mr Boyd's realised gain = $16,800, recognized gain = $0, basis = $13200
Ms Tuck's realized gain = $18500, gain recognized = 0, basis = $41500
Explanation:
1.
Total share = $1200
Cash received from Mr Boyd = 10000
FMV from him = 20000
Total value = 30000
FMV of equipment from Ms Tuck = 60000
Total value from both of them = 60000 + 30000 = $90000
Number of share Mr Boyd is to receive = 1200x(30000/90000)
= 400
Number of share Ms Tuck is to receive
= 1200x(60000/90000)
= 800
2.
<u>Mr Boyd's gains</u>
Cash received = 10000
FMV = 20000
Total = 30000
Adjusted basis = 3200
Total tax basis = 10000+3200
Gain realized = 30000-13200
= 16800
Gain realized = 0 because it is a non taxable exchange.
Mr Boyd's realised gain = $16800, recognised gain = $0, basis = $13200
<u>Ms Tuck</u>
FMV = 60000
Adjusted tax basis = 41500
Gain realized = 60000-41500
= 18500
Gain recognized = 0(non taxable exchange)
Ms Tuck's realized gain = $18500, recognized gain = $0, basis = $41500
3
the FMV basis of inventory = 20000
carryover basis = 3200
equipment basis FMV = 60000
carryover basis = 41500
note that no gain if equal to or more than 80 percent of the ownership of the stock in a non taxable exchange.
