Carl and Ben form Condor Corporation.Carl transfers cash of $50,000 for 50 shares of stock of Condor.Ben transfers a secret process with a tax basis of zero and a fair market value of $50,000 for the remaining 50 shares in Condor.Both Carl and Ben will have a tax basis of $50,000 in their stock in Condor Corporation.

Question

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Carl's tax basis in the stock is $50,000, equal to the cash he contributed. Ben's tax basis is $0, as he transferred an asset with a tax basis of zero.

Carl and Ben Form Condor Corporation