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Clint contributed a piece of equipment to Raccoon Corporation in exchange for stock in a transaction that qualified under Code Sec

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Clint contributed a piece of equipment to Raccoon Corporation in exchange for stock in a transaction that qualified under Code Sec. 351. Clint had purchased the equipment (7-year property) three years ago for $100,000 and had already recorded depreciation of $56,270. Clint had to recognize $10,000 of gain in the transaction because he received boot. Which of the following statements about the depreciation of this equipment for Raccoon is true?

Raccoon will depreciate the $10,000 basis using the same schedule that Clint had already started and will depreciate the $43,730 of basis as if it had bought a new asset for that amount.

Raccoon will continue to depreciate the $43,730 using the same schedule that Clint had already started and will depreciate the additional $10,000 of basis as if it had bought a new asset for that amount.

The entire basis of $53,730 will be depreciated as if Raccoon had purchased a new asset for that amount.

#2

Which of the following would create a deferred tax asset or reduce a deferred tax liability?

Adding a temporary book to tax difference

Subtracting a temporary book to tax difference

Subtracting a permanent book to tax difference

Adding a permanent book to tax difference