Question

Determine the basis of stock in the hands of the shareholder in each of the following instances. Assume that the 80% rule is met in all cases.

Contribution of property with a basis of $1,900 and a FMV of $2,300.

Contribution of property with a basis of $4,800 and a FMV of $6,680. The stockholder also received $1,400 cash from the corporation as part of the stock transaction.

Contribution of property with a basis of $9,100 and a FMV of $14,300. The stockholder also received property with a FMV of $2,600 from the corporation as part of the stock transaction.

Contribution of a building with a FMV of $245,000, a mortgage (assumed by the corporation) of $145,000, and a basis of $215,000.

Contribution of a building with a FMV of $1,790,000, a mortgage (assumed by the corporation) of $1,090,000, and a basis of $680,000.

Answer 1

The solution is as follows :

The basis of the property in the hands of the corporation is equal to the basis in the hands of the share holder plus any gain recognized.

a ) $ 1900

b ) $ 6,2000. The carry over basis of $ 4,800 plus the $ 1,400 gain recognized by the share holder.

c ) $ 11,700. The carry over basis of $ 9100 plus the $ 2,600 gain recognized by the share holder.

d ) $ 215, 000. There is no gain to the share holders because the debt refief is not in excess of basis.

e ) $ 1,090,000. The carry over basis of $ 680, 000 plus the  $ 410, 000 gain recognized by the share holder.