Tax consequences of transfer

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Yager and Boggs formed Y & B Company in 2012. Yager contributed a building with a fair market value of $97,000, a mortgage of $75,000 and an adjusted basis of $50,000 in return for 22 shares of Y & B Company stock. (Y & B assumed the mortgage.) Boggs contributed land with a fair market value of $32,000 and an adjusted basis of $40,000 in return for 12 shares of Y & B Company stock and 10 $1,000 bonds. Lyle performed legal and accounting work during the incorporation process in return for six shares of stock. Determine the tax consequences of the transfers to all parties.

There are three major requirements of Code Section 351: (1) the transfer must consist of property, (2) the transfer must be solely in exchange for stock and (3) the transferors must be in control immediately after the exchange.

Reference no: EM1363605

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