Isabella and Marta form Pine Corporation. Isabella transfers land (basis of $40,000 and fair market value of $180,000) for 50 shares plus $20,000 cash, while Marta transfers $160,000 cash for the other 50 shares in Pine Corporation. Pine Corporation has a basis of $40,000 in the land it receives from Isabella.

Question

Quizplus · Accepted Answer

Pine Corporation's basis in the land is the same as Isabella's adjusted basis of $40,000, as per the rules of Section 351 of the Internal Revenue Code, which allows for non-recognition of gain or loss when property is transferred to a corporation in exchange for stock, provided certain conditions are met.

Isabella and Marta Form Pine Corporation