Question
Naomi incorporates her Sole Proprietorship, transferring its assets to a newly formed Ceasar Corporation. The assets transferred have an Adjusted Basis of $100,000 and a
Naomi incorporates her Sole Proprietorship, transferring its assets to a newly formed Ceasar Corporation. The assets transferred have an Adjusted Basis of $100,000 and a Fair Market Value of $250,000. Also transferred was $30,000 in liabilities, $25,000 of which was for personal (non-business) purposes and the remaining $5,000 being business related. In return for these transfers, Naomi receives all of the stock in Ceasar Corporation. Which of the following is correct?
| Ceasar Corporation will have a basis of $130,000 in the property transferred. | ||
| Naomi's basis in the Ceasar Corporation stock will be $125,000. | ||
| Naomi's basis in the Ceasar Corporation stock will be $130,000. | ||
| Ceasar Corporation will have a basis of $100,000 in the property transferred. |
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