Alec, Bryce, and Connor form Triplets Corporation Problem

 

Problem 2-3 o On June 24th of year 1, Alec, Bryce, and Connor form Triplets Corporation. They transfer the following assets: Property Transferred Transferor Asset Basis to Transferor FMV Number of Common Shares Issued Alec Land $200,000.00 $50,000.00 500 Bryce Production Equipment – 25,000.00 250 Connor Accounting Services – 25,000.00 250 Alec purchased the land 5 years ago for $200,000. Bryce purchase the production equipment 3 years ago for $48,000 and it is fully depreciated. (a) Does the transaction meet the requirements of section 351? (b) What are the amounts of the gains or losses recognized by Alec, Bryce, Connor, and Triplets? (c) What is each shareholders basis in their stock? When does the holding period for the stock begin? (d) What is Triplets’ basis in each asset? When does the holding period begin for each asset?

 

Alec purchased the land (a capital asset) five years ago for $200,000. Bryce purchased the equipment three years ago for $68,000. The equipment has been fully depreciated.

 

a.      Does the transaction meet the requirements of Sec. 351?

b. What are the amount and character of the gains or losses recognized by Alec, Bryce, Connor, and Triplet?

c. What is each shareholder’s basis in his or her Triplet stock? When does the holding period for the stock begin?

d. What is Triplet’s basis in the land, equipment, and services? When does the holding period for each property begin?

e.  How might they restructure this transaction to make it more beneficial from a tax perspective?