Question

Ashley transfers land with a basis of $10,000 and a market value of $40,000 to a corporation in exchange for 100% of the stock

a.) What is Ashley’s recognized gain/loss (2 points)

b.) What is Ashley’s basis (2 points)

c.) Corporation basis (2 points)

Answer 1

A. Ashley's gain is $30,000 (40,000-10,000)

B. Ashley's basis is $40,000

C. The corporation's basis is $40,000.

The corporation's basis in assets it receives in an exchange is the same as the shareholder's adjusted basis at the time of the transfer increased by any gain booked by the shareholder.