Three individuals transferred property to newly formed Triple Inc. in exchange for 1,000 shares of common stock. Mr. Albert transferred assets with a $50,000 tax basis in exchange for 820 shares, Mrs. Billig transferred assets with a $9,000 tax basis in exchange for 148 shares, and Mrs. Crisp transferred $4,000 cash for 32 shares. Based on the FMV of the transferred assets, each Triple share is worth $125. Which of the following is false?
A) Mr. Albert's tax basis in his 820 shares is $50,000.
B) Triple Inc.'s tax basis in the assets transferred by Mrs. Billig is $9,000.
C) Mrs. Crisp's tax basis in her 32 shares is $4,000.
D) None of these choices are false.

Question

Quizplus · Accepted Answer

In a transaction where property is exchanged for stock, the tax basis of the stock received by the transferor is generally the same as the tax basis of the property transferred. Therefore, Mr. Albert's tax basis in his 820 shares would indeed be $50,000, matching the tax basis of the assets he transferred. Similarly, Triple Inc.'s tax basis in the assets transferred by Mrs. Billig would be $9,000, the same as her tax basis in those assets. Mrs. Crisp's tax basis in her 32 shares would be $4,000, the amount of cash she transferred. Thus, all the statements provided are true, making the correct answer that none of these choices are false.

Three Individuals Transferred Property to Newly Formed Triple Inc