Mario and Lupita form a corporation in a transaction coming under Sec. 351. Lupita transfers property with an adjusted basis of $150,000 and an FMV of $200,000 in exchange for one- half of the stock. The property has an $80,000 mortgage, which the corporation assumes. The corporation's basis in the property is

Question

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Under Sec. 351, the corporation's basis in the property is the transferor's adjusted basis, which is $150,000, increased by any gain recognized by the transferor, which in this case is zero since the transaction qualifies for non-recognition. The mortgage assumed does not affect the corporation's basis.

Mario and Lupita Form a Corporation in a Transaction Coming