Chapter 19 Flashcards
Corporate Formation, Reorganization, and Liquidation
Realized gain or loss
19-1
results from an exchange of property rights in a transaction
Recognized gain or loss
19-1
included in taxable income
Gain or Loss Realized in a Property Transaction
19-1
+ Amount Realized (received)
- Adjusted tax basis of the property transferred
= Gain or Loss Realized
Computing the Amount Realized in a Property Transaction
19-1
+ Cash received
+ FMV of other property received
+ Liabilities assumed by the transferee on the transferred property
- Selling expenses incurred in the transactions
- Liabilities assumed by the transferor on any property received in the exchange
= Amount Realized
adjusted tax basis calculation
19-1
+ Acquisition basis
+ Capital improvements
- Depreciation
= Adjusted tax basis
Under what conditions is gain or loss not recognized
19-1
- the gain or loss is excluded from gross income (will never be recognized)
- the gain or deductible loss is deferred from gross income (recognition of gain or deductible loss is postponed to a future period)
Gain or loss deferred in the transfer of property to a corporation in return for stock is reflected in what?
the shareholder’s tax basis in the stock received in exchange for the transferred property
How does a deferred gain in the transfer of property to a corporation in return for stock affect the shareholder’s tax basis in the stock?
It decreases it to an amount equal to the stock’s FMV less the gain deferred
How does a deferred loss in the transfer of property to a corporation in return for stock affect the shareholder’s tax basis in the stock?
It increases it to an amount equal to the stock’s FMV plus the loss deferred
Section 351 applies to those transactions in which…
one or more shareholders transfer property to a corporation in return for stock and immediately after the transfer control the corporation to which they transferred the property
