Harry forms the Nectarine Corporation during the 2013 tax year.To form the corporation,Harry transfers assets having a fair market value of $650,000 to Nectarine Corporation for 100 percent of the corporation's stock.Harry's adjusted basis in the assets transferred was $350,000 and Nectarine Corporation assumed a $200,000 mortgage on the assets.If the fair market value of the stock received by Harry is $450,000,what is his basis in the stock received from the corporation?

Question

Quizplus · Accepted Answer

Harry's basis in the stock received is equal to the fair market value of the assets transferred minus the amount of liabilities assumed by the corporation. In this case, Harry transferred assets with a fair market value of $650,000 and Nectarine Corporation assumed a $200,000 mortgage on the assets. Therefore, Harry's basis in the stock received is $650,000 - $200,000 = $450,000.

Harry Forms the Nectarine Corporation During the 2013 Tax Year