Loonis Inc. and Rhea Company formed LooNR Inc. by transferring business assets in exchange for 1,000 shares of LooNR common stock. Loonis transferred assets with a $820,000 FMV and a $444,000 adjusted tax basis and received 820 shares. Rhea transferred assets with a $180,000 FMV and a $75,000 adjusted tax basis and received 180 shares. Compute Loonis and Rhea's realized and recognized gain on the exchange.

Lioonis and Rhea's realized gain of exchanged cannot be determined.

Explanation:

From the given question, let us recall that,

Loonis transferred assets with a=  $820,000 FMV and a $444,000 adjusted tax basis and received 820 shares.

Rhea transferred assets with a $180,000 FMV and a $75,000 adjusted tax basis and received 180 shares.

The next step is to compute Loonis and Rhea's realized and recognized gain on the exchange.

Now,

The stock of Loonis has a  $444,000 substituted basis; Rhea has a $75,000 substituted basis

Loonis assets have a $519,000 carryover basis.

Therefore, Loonis and Rhea's realized and recognized gain on the exchange cannot be determined.