Question

Ann and Bob form Robin Corporation. Ann transfers property worth $420,000 (basis of $150,000) for 70 shares in Robin Corporation. Bob receives 30 shares for property worth $165,000 (basis of $30,000) and for legal services (worth $15,000) in organizing the corporation.
a. What gain or income, if any, will the parties recognize on the transfer?
b. What basis do Ann and Bob have in the stock in Robin Corporation?
c. What is Robin Corporation's basis in the property and services it received from Ann and Bob?

Answer 1

Answer:

Explanation:

a. . What gain or income, if any, will the parties recognize on the transfer?

It should be noted that a gain or a loss will not be recognized when a property is being transferred to a company in order for the said property to be exchange for a stock. Therefore, none of the parties that are involved will get any gain or income.

b. What basis do Ann and Bob have in the stock in Robin Corporation?

Based on the question, Ann will have a basis of $150,000 while Bob will get ($30,000 + $15,000) = $45,000 in the stock in Robin Corporation.

c. What is Robin Corporation's basis in the property and services it received from Ann and Bob?

Robin Corporation's basis in the property and services it received from Ann and Bob is a value of $150,000 for the assets of Ann and $30,000 for Bob's asset.