Mandel transferred property to his new corporation in a §351 transaction. Among the several properties transferred by Mandel was land with a fair market value of $200,000 and a tax basis of $250,000. In all cases, the corporation will always take a tax basis in the land of $200,000 to prevent the "built-in loss" from being transferred from Mandel to the corporation.

Question

Quizplus · Accepted Answer

In a §351 transaction, the corporation takes a carryover basis in the property transferred to it, which means the corporation's basis in the land would be Mandel's basis of $250,000, not the fair market value of $200,000. This preserves the "built-in loss" in the hands of the corporation.

Mandel Transferred Property to His New Corporation in a §351