1. On March 2, 2020, the two 50% shareholders of a calendar year corporation decide to elect S status. One of the shareholders, Terry, purchased her stock from a previous shareholder (a nonresident al
eBookAmy, Becky, and Chau form a business entity with each contributing the following.
| Adjusted Basis | Fair Market Value | Ownership Percentage | Amy: Cash | $100,000 | | | $100,000 | | | 40% | | | Becky: Land | $60,000 | | | 120,000 | | | 40% | | | Chau: Services | | | | 50,000 | | | 20% | | | |
Becky's land has a $20,000 mortgage that is assumed by the entity. Chau, an attorney, receives her ownership interest in exchange for legal services. Determine the recognized gain to the owners, the basis for their ownership interests, and the entity's basis for its assets under each entity scenario.
If an amount is zero, enter "0".
a. Entity: Partnership.
Partnership | | Recognized Gain | Partners' Basis | Amy | Becky | Chau | |
Asset | Partnership's Basis | Cash | Land | Organizational Costs | |
b. Entity: C corporation.
C corporation | | Recognized Gain | Shareholders' Basis | Amy | Becky | Chau | |
Asset | C Corporation's Basis | Cash | Land | Organizational Costs | |
c. Entity: S corporation.
S corporation | | Recognized Gain | Shareholders' Basis | Amy | | Becky | Chau | |
Asset | S Corporation's Basis | Cash | Land | Organizational Costs | |