On 1/1/2013, Shareholder A & B incorporated ACME by transferring cash, a building, and land to the corporation in return...

On 1/1/2013, Shareholder A & B incorporated ACME by transferring cash, a building, and land to the corporation in return for 100 percent of the corporation’s stock.  The property transferred to the corporation had the following fair market value and adjusted basis. Each shareholder was issued 100 shares of $10 par value stock.                                                                                                                         

The fair market value of the corporation’s stock received in the exchange equaled the fair market value of the assets transferred to the corporation by the shareholders.  The transaction met the requirements to be tax-deferred under §351.                                                                                                                               

The Building has never been depreciated and has a mortgage attached to it in the amount of $50,0000 (considered to be business purpose debt). ACME  Inc. will assume the mortgage. Shareholder A also received $25,000 in boot in the transaction.                                                                                                                       

Liability                                                                                 par value $10                    

                Item      Fair Value            Adjusted Basis  Boot Rec'd          Book Value         # shares issued                

Shareholder B   Cash      $300,000              $300,000                              $275,000             100                        

Shareholder A   Building                $300,000              $110,000              $25,000                 $300,000             100                        

Shareholder A   Mortgage            $(50,000)                                            $(50,000)                                           

Shareholder A   Land      $75,000                 $60,000                 $-            $75,000                                               

                Total      $625,000              $470,000              $25,000                 $600,000              200                       

                                                                                (FMV of stock issued)                                   

Create the journal entry to record this event.                                                                                                                    

Calculate shareholder gain realized and if necessary, recognized for the transaction.                                                                                                                      

                gain realized       gain recognized                                                                                               

Shareholder A:                                                                                                                 

Shareholder B: