Home / Questions / Ted decides to incorporate his medical practice.He uses the cash method All the current l
Ted decides to incorporate his medical practice.He uses the cash method All the current liabilities will bedeductible by Ted if he pays them. All the current liabilitieswould be deductible by Ted if he paid them. Ted transfers allassets and liabilities to a professional corporation in exchangefor all of its stock.
A) What are the amount and character of Ted's recognized gain orloss?
B) What is Ted's basis in the stock?
C) What is the corporation's basis in the property?
D) Who recognized income on the receivables upon theircollection? Can the corporation obtain a deduction for theliabilities when it pays them?
Cash 
$5,000 
$5,000 

A/R 
$0 
$65,000 

Equip. (net of $15,000 depreciation) 
$35,000 
$40,000 

Total 
$40,000 
$110,000 

Liabilites and Owner's Equity 



Current liabilities 
$0 
$35,000 

Note payable on equip. 
$15,000 
$15,000 

Owner's equity 
$25,000 
$60,000 

Total 
$40,000 
$110,000 





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