On June 4th, 2005, the following cash basis individuals formed Wiley Corporation, an accrual basis corporation, by transferring the following assets: Transferor Asset Adj. Basis to FMV Shares Transferor Issued* Wiley Inventory $ 22,000 $52,000 ?? Building 48,000 90,000 Loan on Building 60,000 60,000 Loan on Inventory 12,000 12,000 George Equipment 130,000 140,000 ?? Accounts Receivable NONE 40,000 Loan on Equipment 140,000 140,000 Services NONE 30,000 *Each share of stock has a FMV of $1,000. Wiley and George have terrible memories and therefore do not know how many shares they received. ○ Wiley purchased the inventory on 1/1/2005 for $22,000 and the building on 1/1/2001 for 63,000. ○ Wiley received $10,000 cash in addition to his shares. George received $20,000 of cash in addition to her shares. ○ George purchased the equipment on 6/12/2003 for $170,000. ○ The proceeds from Wiley’s loan on the building were used for business activities. ○ The proceeds from George’s loan on the equipment were used for personal (non-business) activities. ○ All loans in the problem were assumed by the corporation. ○ Wiley did not provide any services (George says he doesn’t ever do anything…) ϑ. QUESTION: What is Brad’s gain realized? QUESTION: What is Brad’s boot received? QUESTION: What is Brad’s gain recognized? QUESTION: What is Brad’s basis in the stock he received? QUESTION: What is the corporation’s basis in the building?
