How much taxable gain or loss will Huppe recognize

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Question - Huppe and Heeter decide to form a new corporation - H2O Meetings and Incentives Corp. Huppe contributes property with a tax basis of $2 million and a fair market value of $5 million, in exchange for 1,000 shares of H2O Meetings and Incentives stock and $1,000,000 of cash (H2O Meetings and Incentives borrows the cash from a financial institution). Heeter contributes property with a tax basis of $1.1 million and a fair market value of $1.5 million in exchange for 200 shares of H2O Meetings and Incentives stock and $500,000 of cash. Each share of H2O Meetings and Incentives stock is worth $5,000. Assume that this corporate formation meets the requirements of I.R.C. Section 351 (Huppe and Monty control 80% of H2O Meetings and Incentives after the exchange).

Required -

How much taxable gain or loss will Huppe recognize as a result of the transaction?

What basis will Huppe take in the H2O Meetings and Incentives stock he receives?

How much taxable gain or loss will Heeter recognize as a result of the transaction?

What basis in Heeter's property will H2O Meetings and Incentives Corp. take?

What basis will Heeter take in the H2O Meetings and Incentives stock he receives?

Reference no: EM132481886

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