Carl and Ben form Eagle Corporation.Carl transfers cash of $50,000 for 50 shares of stock of Eagle.Ben transfers a secret process with a tax basis of zero and a fair market value of $50,000 for the remaining 50 shares in Eagle.Carl will have a tax basis of $50,000 in his stock in Eagle Corporation, but Ben's basis in his stock will be zero.

Question

Quizplus · Accepted Answer

This is because Carl transferred cash of $50,000 for his 50 shares of stock, so his tax basis in the stock will be $50,000. On the other hand, Ben transferred a secret process with a tax basis of zero and a fair market value of $50,000 for his 50 shares of stock. Therefore, Ben's basis in his stock will also be zero.

Carl and Ben Form Eagle Corporation