During 2017,Jimmy incorporates his data processing business.Jimmy is the sole shareholder.The following assets are transferred to the corporation:
Cash $2,000
Computer Equipment:
Fair market value 20,000
Adjusted basis 12,000
Original cost 24,000
Furniture:
Fair market value 20,000
Adjusted basis 32,000
Original cost 64,000

How much gain (loss)will Jimmy recognize from the transfer of the assets to the corporation?

Question

During 2017,Jimmy incorporates his data processing business.Jimmy is the sole shareholder.The following assets are transferred to the corporation:
Cash $2,000
Computer Equipment:
Fair market value 20,000
Adjusted basis 12,000
Original cost 24,000
Furniture:
Fair market value 20,000
Adjusted basis 32,000
Original cost 64,000
​
How much gain (loss)will Jimmy recognize from the transfer of the assets to the corporation?

Quizplus · Accepted Answer

Jimmy will not recognize any gain or loss on the transfer of assets to the corporation because he is the sole shareholder and the transfer qualifies for non-recognition under IRC Section 351, which allows for tax-free transfers of property to a corporation in exchange for stock if the transferor is in control of the corporation immediately after the exchange.

During 2017,Jimmy Incorporates His Data Processing Business