Question
Zhang incorporated her sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporations stock. The
Zhang incorporated her sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporations stock. The property transferred to the corporation had the following fair market values and adjusted bases:
FMV | Adjusted Basis | ||||
Inventory | $ | 68,000 | $ | 34,000 | |
Building | 510,000 | 340,000 | |||
Land | 782,000 | 1,020,000 | |||
Total | $ | 1,360,000 | $ | 1,394,000 | |
|
The corporation also assumed a mortgage of $100,000 attached to the building and land. The fair market value of the corporations stock received in the exchange was $1,260,000. The transaction met the requirements to be tax-deferred under 351.
Assume the corporation assumed a mortgage of $1,460,000 attached to the building and land. Assume the fair market value of the building is now $850,000 and the fair market value of the land is $1,802,000. The fair market value of the stock remains $1,260,000.
g. What is the corporations adjusted basis in each of the assets received in the exchange?
Inventory Building Land
Adjusted basis
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