Andre receives 50 shares of stock with a fair market value of $200,000 plus $50,000 cash in exchange for his contribution of machinery, land and inventory valued at $40,000, $150,000 and $60,000, respectively. How does Andre allocate the boot for purposes of calculating gain recognized?

Question

Business

Rex Marshall

16 August, 00:51

Andre receives 50 shares of stock with a fair market value of $200,000 plus $50,000 cash in exchange for his contribution of machinery, land and inventory valued at $40,000, $150,000 and $60,000, respectively. How does Andre allocate the boot for purposes of calculating gain recognized?

+4

Answers (2)

Know the Answer?

Tammy · Answer 1

Machinery amount is = $8,000;

Land amount is = $30,000;

And inventory amount is = $12,000.

machinery 40/250 = 16% x $50,000 = $8,000;

land 150/250 = 60% x $50,000 = $30,000;

inventory = 60/250 = 24% * $ 12,000.

James Stone · Answer 2

Andre has a gain of $50,000.

It will be allocated as follows:

Machinery = $8,000; land = $30,000; and inventory = $12,000.

Machinery 40/250 = 16% x $50,000 = $8,000

Land 150/250 = 60% x $50,000 = $30,000

Inventory = 60/250 = 24% x $50,000 = $12,000