Individuals Terry and Jim form TJ Corporation.Terry transfers cash of $930,000 in exchange for 50% of the stock of the TJ Corporation worth $900,000 and a $30,000 note.Jim transfers equipment with a $890,000 adjusted basis and a $930,000 FMV for 50% of the stock worth $900,000 and a note of the TJ Corporation valued at $30,000.The basis of the equipment to TJ Corporation is

Question

Quizplus · Accepted Answer

The basis of the equipment to TJ Corporation is equal to its FMV at the time of transfer, which is $930,000. Therefore, the total basis of TJ Corporation after formation is $930,000 cash + $930,000 equipment = $1,860,000. Since each shareholder owns 50% of the corporation, their basis in their shares is $930,000.

Individuals Terry and Jim Form TJ Corporation