Nancy, Guy, and Rob form Goldfinch Corporation with the following
consideration.
                             Adjusted Basis      Fair Market Value
From Nancy---
     Cash                    $100,000                 $100,000
     Inventory                 80,000                  100,000
From Guy-----
     Land and Building        120,000                  200,000
From Rob-----
     Legal and Accounting services to Incorporate       20,000

Goldfinch issues its 400 shares of stock as follows:  200 to Nancy,
180 to Guy, and 20 to Rod.  In addition, Guy gets $20,000 in cash

A.  Does Nancy, Guy, or Rob recognize gain (or income)?
B.  What basis does Guy have in the Goldfinch stock?
C.  What basis does Goldfinch Corporation have in the inventory?  In
the land and Building?
D.  What basis does Rob have in the Goldfinch stock?

Hi there,

a) Nancy recognizes no gain. Due to the boot he receives, Guy
recognizes $10,000 of gain. Rod has ordinary income of $10,000 for the
services he performs.


b) Guy's basis in the stock:

A.B. (land & building) $60,000

+ Gain recognized 10,000

- Boot received (10,000)

A.B. stock $60,000


c) Goldfinch basis in: Inventory is $40,000

Land and building $70,000 (60,000 Guy's basis + 10,000 gain recognized
by Guy)


d) Rod's basis in Goldfinch stock is $10,000.
http://www.cba.siu.edu/accounting/reserve/441EXAM1.ans.htm

Search strategy: Goldfinch Corporation


Best wishes,
robertskelton-ga

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Request for Answer Clarification by alpa101473-ga on 07 Apr 2003 21:27 PDT

Hi,

How did you come by the figure of $10,000 for Guy's recognized gain
and Rod's ordinary income?

Also, How did you come by the Adjusted Basis of $60.000 for Guy's
basis? and Goldfinch's basis in inventory of $40,000?

Thank you!

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Clarification of Answer by robertskelton-ga on 07 Apr 2003 22:08 PDT

I didn't!

All I did was find the answer online. I have no personal understanding
of Federal Taxation.