Silvia Transfers to Leaf Corporation a Machine She Had Purchased
Silvia transfers to Leaf Corporation a machine she had purchased a year ago for $50,000.The machine has a $40,000 adjusted basis and a $55,000 FMV on the transfer date.$10,000 in depreciation was claimed by Silvia prior to the transfer.Silvia receives all 1,000 shares of Leaf Corporation stock worth $50,000 and a two-year note with a $5,000 FMV.What is the amount and character of the recognized gain or loss?
A) $15,000 ordinary income
B) $15,000 capital gain
C) $5,000 ordinary income
D) $5,000 capital gain
Jeremy operates a business as a sole proprietorship.The proprietorship uses the cash method of accounting.He decides to incorporate and transfers the assets and liabilities of the sole proprietorship to the newly formed corporation in exchange for its stock.The assets,which include $10,000 of accounts receivable with a zero basis,have a basis of $20,000 and an FMV of $40,000.The liabilities include accounts payable of $12,000,which will be deductible when paid,and a note payable on medical equipment of $7,000.Jeremy's basis for his stock is
Colleen operates a business as a sole proprietorship.She purchased a computer for $10,000 last year.The computer is five-year recovery property for MACRS purposes and is depreciated under the regular MACRS rules.This year,Colleen incorporates the business and transfers the computer to the new corporation on July 20.The depreciation on the computer for this year allocable to the sole proprietorship is
Identify which of the following statements is true.
A) The transferor must recapture depreciation when exchanging Sec. 1245 property in all transactions coming under Sec. 351.
B) A corporation receiving property in a Sec. 351 exchange can select any MACRS depreciation method for the asset.
C) When depreciable property is transferred to a corporation in a Sec. 351 exchange in which no gain is recognized, the corporation must continue to use the transferor's depreciation method and recovery period for the property.
D) All of the above are false.