Problem NO: 13

Johanne transferred investment property to S&J Corporation in exchange for 60 percent of the S&J Corporation stock (60 shares valued at $115,000). The

Johanne transferred investment property to S&J Corporation in exchange for 60 percent of the S&J Corporation stock (60 shares valued at $115,000). The property's fair market value was $190,000 and its tax basis to Johanne was $60,000. The investment property was subject to a $75,000 mortgage that S&J Corporation assumed on the transfer (not treated as boot).  

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a. Assuming the transfer qualifies under §351, what are the amount and character of the gain Johanne must recognize on the exchange? 

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b. What is Johanne's tax basis in the S&J stock he received in the exchange?

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c. Assume that in addition to the investment property, Johanne transferred inventory with a fair market value of $30,000 and a tax basis of $20,000 for additional S&J Corporation stock. What are the amount and character of gain Johanne must recognize on the exchange of the investment property and inventory for stock?

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d. Assuming the facts in part (c), what is Johanne's basis in the S&J stock he received in the exchange?

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e. Assume the original facts except that the liability assumed by S&J Corporation would give rise to a deduction when paid. What are the amount and character of gain Johanne must recognize on the exchange?

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f. Assuming the facts in part (e), what is Johanne's basis in the S&J stock he received in the exchange?

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