Carl and Ben form Eagle Corporation.Carl transfers cash of $50,000 for 50 shares of stock of Eagle.Ben transfers proprietary information 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, which becomes his tax basis in his stock in Eagle Corporation. Meanwhile, Ben transferred proprietary information, which has a tax basis of zero, meaning he does not have a tax basis in his stock in Eagle Corporation. Therefore, Carl's tax basis in his stock will be $50,000, but Ben's tax basis will be zero.

Carl and Ben Form Eagle Corporation