Camilla and Dean form Grouse Corporation with the following investment: Camilla and Dean each receive 300 shares of stock in Grouse Corporation and,in addition,Dean receives $30,000 in cash.As a result of the transfer,Dean's basis in the stock and Grouse's basis in the property will be:

Question

Camilla and Dean form Grouse Corporation with the following investment:  Camilla and Dean each receive 300 shares of stock in Grouse Corporation and,in addition,Dean receives $30,000 in cash.As a result of the transfer,Dean's basis in the stock and Grouse's basis in the property will be:

Quizplus · Accepted Answer

The total investment in Grouse Corporation is the value of the property plus the cash, which is $300,000 + $30,000 = $330,000.

Thus, Camilla and Dean's basis in the stock should be equal to the total investment divided by the number of shares, which is $330,000 / 600 shares = $550 per share.

Camilla and Dean each received 300 shares, so their basis in the stock is $550/share x 300 shares = $165,000.

Meanwhile, Grouse Corporation's basis in the property is the fair market value of the property, which is $300,000. Therefore, the correct answer is B.

Camilla and Dean Form Grouse Corporation with the Following Investment