Len Wallace contributed assets with a $100,000 adjusted basis and a $400,000 FMV to Ace Corporation in exchange for all of its single class of stock. The corporation conducted operations for five years and was liquidated. Len received a liquidating distribution of $500,000 cash? (less federal income taxes owed on the liquidation by the? corporation) and the assets that he had? contributed, which now have a $100,000 adjusted basis and a $500,000 FMV. Assume a 21?% corporate tax rate.
a. What are the tax consequences of the corporate formation? transaction? Len _does not recognize / recognize_ the ___________ _gain / loss_realized on the asset transfer to Ace Corporation. Len’s basis for the Ace stock he receives is __________. Ace Corporation’s basis for the asset is _____________.
b. What are the tax consequences of the corporate liquidation? transaction?
c. Would your answers to Parts a and b remain the same if instead the assets had been contributed by Wallace Corporation to Ace ?Corporation? If? not, explain how your? answer(s) would? change?
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