A transfers machines valued at $170,000 (basis = $150,000) along with $30,000 cash to AB Corporation and B transfers real property valued at $320,000 (basis = $310,000) to the corporation. A receives 40 percent of the outstanding stock and B receives 60 percent. B also receives $20,000 from the corporation. What is A's basis for his AB stock?
A) $180,000
B) $170,000
C) $160,000
D) $150,000

Question

A transfers machines valued at $170,000 (basis = $150,000) along with $30,000 cash to AB Corporation and B transfers real property valued at $320,000 (basis = $310,000) to the corporation. A receives 40 percent of the outstanding stock and B receives 60 percent. B also receives $20,000 from the corporation. What is A's basis for his AB stock?
A) $180,000 
B) $170,000
C) $160,000
D) $150,000

Quizplus · Accepted Answer

The basis of A's stock is equal to the fair market value of the property transferred to the corporation ($170,000) plus the cash contributed ($30,000), multiplied by the percentage of stock received (40%). Therefore, A's basis is $170,000 + $30,000 x 40% = $180,000.

A Transfers Machines Valued at $170,000 (Basis = $150,000) Along