Three individuals form Skylark Corporation with the following contributions: Cliff, cash of $50,000 for 50 shares; Brad, land worth $20,000 (basis of $11,000) for 20 shares; and Ron, cattle worth $9,000 (basis of $6,000) for 9 shares and services worth $21,000 for 21 shares.
A) These transfers are fully taxable and not subject to § 351.
B) Ron's basis in his stock is $27,000.
C) Ron's basis in his stock is $6,000.
D) Brad's basis in his stock is $20,000.
E) None of these.

Question

Quizplus · Accepted Answer

Ron receives stock for both property and services. His basis in the stock received for property is the basis of the property transferred ($6,000) plus the value of the stock received for services ($21,000), totaling $27,000.

Three Individuals Form Skylark Corporation with the Following Contributions: Cliff