Question

Marie and Ethan form Roundtree Corporation with the transfer of the following. Marie performs personal services for the corporation with a fair market value of $193,200 in exchange for 400 shares of stock. Ethan contributes an installment note receivable (basis $25,000; fair market value $30,000), land (basis $50,000; fair market value $170,000) and inventory (basis $458,240; fair market value $572,800) in exchange for 1,600 shares.

If an amount is zero, enter "0". Marie has income of $______ and $_________ basis in her 400 shares of stock and Ethan has income of $________ and $_______ basis in his 1,600 shares of stock.

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Answer 1

If an amount is zero. Marie has income of $193,200 and $193,200 basis in her 400 shares of stock and Ethan has income of $0 and $533,240 basis in his 1600 shares of stock.

Step-by-step explanation:

Ethan has no income and Ethan contributed the following assets and basis value of such assets will be basis for 1600 shares of stock:

Basis of Ethan:

Note Receivable = 25,000

land = 50,000

Inventory = 458,240

Total basis = 25,000 + 50,000 + 458,240 = $533,240

We can now see Ethan has a total basis of $533,240