Brick Wall runs a private detective agency as a sole proprietor on the cash basi

Question

Brick Wall runs a private detective agency as a sole proprietor on the cash basis. He decides to incorporate as Noir, Inc. and transfers the assets of the business to the corporation in return for all the stock plus the corporation's assumption of the liabilities of the agency. The assets had a basis of S115,000 and a FMV of S270,000. There were A/P of S15,000 for legmen hired and a note payable to the bank for period office furniture of $120,000. O a. Brick recognizes a gain of S20,000 b. The corporation's basis in the assets is $115,000. c. Brick has a basis of $15,000 in his stock. d.Brick has a zero basis in his stock. e.Both a and c.

Explanation / Answer

D. The brick has a zero basis in stock.

The stock has a debit balance of 20000

Therefore there is no basis on stock

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