On July 1, of the current year, Robert forms the Yew Corporation. In exchange for 100 percent of the corporation's stock, Robert contributes land with a fair market value of $100,000. Robert acquired the land 5 years ago at a cost of $30,000. At the date of the contribution, the land is subject to a $10,000 mortgage which the corporation assumes. What is the basis of the land to Yew Corporation?

Question

Quizplus · Accepted Answer

The basis of the land to Yew Corporation is the same as Robert's adjusted basis in the land, which is $30,000, as the transfer qualifies under IRC Section 351 for non-recognition of gain or loss. The mortgage assumed does not affect the basis.

On July 1, of the Current Year, Robert Forms the Yew