Terry forms the Camphor Corporation during the current year. She transfers property with a value of $700,000 to Camphor Corporation in exchange for 100 percent of the stock in the corporation. Terry's basis in the property transferred was $400,000 and the corporation assumed a $275,000 mortgage on the property. If the fair market value of the stock received by Terry is $450,000, what is the corporation's basis in the property received from Terry?

Question

Quizplus · Accepted Answer

The corporation's basis in the property is the same as Terry's adjusted basis in the property, which is $400,000, because the transfer qualifies as a tax-free exchange under IRC Section 351.

Terry Forms the Camphor Corporation During the Current Year