Lesson 3A In Class Exercise  

1.  In 2002, D, E and F form T corporation.  D contributes land (a capital asset) purchased in 2000 to T with a basis of 60,000 and a fmv of 50,000 in exchange for 50 shares.  E contributes machinery purchased in 1999 with a basis of 45,000 and a fmv of 30,000 in exchange for 30 shares.  F contributes services worth 20,000 in exchange for 20 shares.

a.	What is the amount of D’s recognized gain or loss?

b.	What is D’s basis in his T shares?  When does his holding period begin?

c.	What is the amount of E’s recognized gain or loss?

d.	What is E’s basis in his T shares?  When does his holding period begin?

e.	How much income must F recognize?

f.	What is F’s basis in her shares?  When does her holding period begin?

2.  In 2002, E, F and G form J corporation.  E contributes land purchased in 1998 for 15,000 that has a fmv of 35,000 in exchange for 35 shares.  F contributes machinery having a basis of 45,000 and a fmv of 35,000 in exchange for 35 shares.  G contributes services worth 30,000 in exchange for 30 shares.  

a.	What is E’s recognized gain or loss?

b.	What is E’s basis in his J shares?  When does his holding period begin?

c.	What is F’s recognized gain or loss?  

d.	What is F’s basis in her shares?  When does her holding period begin?

e.	What is G’s recognized gain or loss? 

f.	What is G’s basis in his shares?  When does his holding period begin?