Egret Corporation, a calendar year C corporation, was formed on June 7, 2010, and opened for business on September 1, 2010. After its formation but prior to opening for business, Egret incurred the following expenditures: Accounting $ 4,000 Advertising 9,500 Employee payroll 12,000 Rent 9,000 Utilities 2,000

What is the maximum amount of these expenditures that Egret can deduct in 2010?

Locust Corporation desires to set up a distribution facility in a southern state. After considerable negotiations with a small town in Alabama, Locust accepts the following offer: land (fair market value of $3 million) and cash of $1 million.

a. How much gain, if any, must Locust Corporation recognize

? b. What basis will Locust Corporation have in the land?

c. Within one year of the contribution, Locust constructs a building for $800,000 and purchases inventory for $200,000. What basis will Locust Corporation have in each of these assets?


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