Transcribed Image Text
In: AccountingPart 1:Lourdes incorporated her sole proprietorship by transferringinventory, equipment, and land to the corporation...Part 1:Lourdes incorporated her sole proprietorship by transferringinventory, equipment, and land to the corporation in return for 100percent of the corporation’s stock. The property transferred to thecorporation had the following fair market value and adjustedbasis.Property TransferFMVAdjustedBasisInventory$ 20,000$ 10,000Equipment$150,000$100,000Land$250,000$300,000Total$420,000$410,000The corporation also assumed a note payable of $120,000 attachedto the Equipment and land. The fair market value of thecorporation’s stock received in the exchange was $300,000.What amount of gain or loss does Lourdes realize on thetransfer of the property to the corporation?What amount of gain or loss does Lourdes recognize onthe transfer of the property to her corporation?What is Lourdes’s basis in the stock she receives in hercorporation?Would you advise Lourdes to transfer the equipment and land tothe corporation? What tax benefits might she and the corporationreceive if she kept the equipment and land and leased it to thecorporation?Part 2:Alan owns stock in two S corporations, Cyan and Verde. Heactively participates in the management of Cyan but is only apassive investor in Verde. Both Cyan and Verde anticipate a lossthis year. Alan’s basis in the stock of both corporations is $0. IfAlan plans on making a capital contribution to at least one of thecorporations this year, which firm should it be if his objective isto increase his chances of deducting the loss allocated to him fromthe entity? Why?