Mr. A owned 75% of the voting stock and 85% of the nonvoting stock of Corporation Y. Mr. A transferred property with a fair mark

Question

3 years ago

13

Mr. A owned 75% of the voting stock and 85% of the nonvoting stock of Corporation Y. Mr. A transferred property with a fair mark

et value of $90,000 and an adjusted basis of $70,000 to Y for an additional 5% of the voting stock and 5% of the nonvoting stock. What is the amount of gain to be recognized by Mr. A?

Business

1 answer:

Lena [83] · Answer 1 · 2022-04-16T18:41:16+03:00

Answer:

$0

Explanation:

Since Mr. A already owns 75% of common stock (and 85% of nonvoting stock), the extra 5% will result in a total of 80% (and 90%), that means that he cannot recognize any loss or gain resulting from this transaction. This applies to all stockholders that own at least 80% of a company's stocks and transfer property in exchange for more stocks.