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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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