Essay Help:What are the tax consequences for NetCo when it contributes these assets to ArgCo in exchange for ArgCo stock?

NetCo, a US corporation, is planning to start operating in Argentina.  NetCo has formed a 100% owned subsidiary in Argentina, ArgCo.  NetCo contributes a number of assets to ArgCo in exchange for all of ArgCo’s stock.  ArgCo will use the assets in an active trade/business.  The assets contributed include the following:

–          Accounts receivable with a basis of $20,000 and a fair market value of $65,000,

–          Equipment that was purchased for $250,000 and depreciated over the years such that the current adjusted basis is $190,000.  The fair market value of the equipment is $260,000,

–          Inventory that cost $50,000 has a value of $80,000, and

–          Non-depreciable equipment that was purchased for $110,000 and has a fair market value of $165,000.

What are the tax consequences for NetCo when it contributes these assets to ArgCo in exchange for ArgCo stock?

 

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