Zhang incorporated her sole proprietorship by transferring inventory, a building

Question

Zhang incorporated her 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:

The corporation also assumed a mortgage of $115,000 attached to the building and land. The fair market value of the corporation’s stock received in the exchange was $310,450. The transaction met the requirements to be tax-deferred under §351.

Assume the corporation assumed a mortgage of $478,550 attached to the building and land. Assume the fair market value of the building is now $236,700 and the fair market value of the land is $631,200. The fair market value of the stock remains $310,450.g. What is the corporation’s adjusted basis in each of the assets received in the exchange?

FMV Adjusted Basis Inventory $ 78,900 $ 39,450 Building 140,000 115,000 Land 206,550 278,000 Total $ 425,450 $ 432,450

Explanation / Answer

FMV Adjusted basis Mortgage Inventory $ 78,900.00 $                           39,450.00 Building $140,000.00 $                         115,000.00 115,000 Land $206,550.00 $                         278,000.00 Total      425,450                                432,450 Market value of stock received 310,450 g. What is the corporation’s tax-adjusted basis in each of the assets received in the exchange Adjusted basis Revised FMV Inventory        39,450                                  78,900 Building      115,000                                236,700 Land      278,000                                631,200 Total      432,450                                946,800 The liability assumed by the corporation exceeds the total tax adjusted basis of the property Zhang transferred to the Corporation by $46100 ($478550-$432450) Zhang recognises gain of $46,100 on this transfer The gain recognised must be allocated to the tax basis of the assets received by the corporation in proportion to the asset's relative fair market value Amount($) Inventory $39450 + $78,900/$946,800*$46,100 = $    43,291.67 Building $115,000+ $236,700/$946,800*$46,100 = $ 126,525.00 Land $278,000 + $631,200/$946,800*$46,100 = $ 308,733.33 $ 478,550.00 The total Tax Basis of the three assets equal their carryover basis plus the gain recognised by zhang on the exchange

Related Questions

Navigate

• Browse (All)
• Browse Z
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.