Question

Ramon incorporated his sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation’s stock. The property transferred to the corporation had the following fair market values and adjusted bases:

	FMV			Adjusted Basis
Inventory	$	33,750		$	11,600
Building		70,000			44,250
Land		135,000			53,500
Total	$	238,750		$	109,350

The fair market value of the corporation’s stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Ramon. (Leave no answer blank. Enter zero if applicable. Negative amounts should be indicated by a minus sign.)

a. What amount of gain or loss does Ramon realize on the transfer of the property to his corporation?

b. What amount of gain or loss does Ramon recognize on the transfer of the property to his corporation?

c. What is Ramon’s basis in the stock he receives in his corporation?

Answer 1

Answer:

Requirement-1

Ramon realizes a net gain of on this transfer computed as follows:

Fair market value stock received	238750
Less adjusted tax basis of property transferred	109350
Gain Realized	129400

Requirement-2

Ramon does not recognized any transfer property of his corporations of any gain or loss on the transfer because the requirements of section 351 are met and no boot is received in the exchange.

Requirement-3

109350 Ramon tax basis in the stock received is substituted basis of the assets transferred.