Trudy forms Oak Corporation by transferring land with a basis of $150,000 (fair market value of $800,000), subject to a mortgage of $450,000. Two weeks prior to incorporating Oak, Trudy borrows $10,000 for personal purposes and gives the lender a second mortgage on the land. Oak Corporation issues stock worth $340,000 to Trudy and assumes the two mortgages on the land. What are the tax consequences to Trudy and to Oak Corporation?

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The Answer of Trudy forms Oak Corporation by transferring land with a basis of $150,000 (fair market value of $800,000), subject to a mortgage of $450,000. Two weeks prior to incorporating Oak, Trudy borrows $10,000 for personal purposes and gives the lender a second mortgage on the land. Oak Corporation issues stock worth $340,000 to Trudy and assumes the two mortgages on the land. What are the tax consequences to Trudy and to Oak Corporation?

Trudy Forms Oak Corporation by Transferring Land with a Basis