Stacey, a cash basis taxpayer, Incorporated her CPA practice. No liabilities wer

Question

Stacey, a cash basis taxpayer, Incorporated her CPA practice. No liabilities were transferred. The following assets were transferred to the Corp :
Cash (checking account). $ 500 Computer equipment: Adjusted basis. 30,000 FMV. 34,000 Original cost. 40,000
Immediately after transfer, Stacey owned 100% of Corps stock. What is corps total basis for the transferred assets?
$30,000. $30,500. $34,500. Or. $40,500
Stacey, a cash basis taxpayer, Incorporated her CPA practice. No liabilities were transferred. The following assets were transferred to the Corp :
Cash (checking account). $ 500 Computer equipment: Adjusted basis. 30,000 FMV. 34,000 Original cost. 40,000
Immediately after transfer, Stacey owned 100% of Corps stock. What is corps total basis for the transferred assets?
$30,000. $30,500. $34,500. Or. $40,500

Cash (checking account). $ 500 Computer equipment: Adjusted basis. 30,000 FMV. 34,000 Original cost. 40,000
Immediately after transfer, Stacey owned 100% of Corps stock. What is corps total basis for the transferred assets?
$30,000. $30,500. $34,500. Or. $40,500

Explanation / Answer

In this case, the transfer of property by Stacey is in the exchange of Corps stock and she is owning 100% of the stocks, there would be no gain or loss recognised in this transaction as per section 351. Additionally, the property transferred to the corps will carry the same basis amount as it was before and this would also become the basis for the stock received by Stacey, Therefore the corps total basis for the transferred assets would be :

Cash - $ 500

Computer Equipment - $ 30000 (Adjusted basis, this refers to adjustment for depreciation or any capital enhancement or reduction in value, this cannot be more than fair value, if it is more than fair value than adjustment is made to bring value to fair value)

Total Basis for transferred assets - $30500

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