Jacob and Ashley form Junco Corporation with the following investments: Jacob and Ashley each receive one-half of the Junco stock.In addition,Ashley receives cash of $100,000.One of the results of these transfers is:

Question

Jacob and Ashley form Junco Corporation with the following investments:  Jacob and Ashley each receive one-half of the Junco stock.In addition,Ashley receives cash of $100,000.One of the results of these transfers is:

Quizplus · Accepted Answer

The investments made by Jacob and Ashley are not relevant to determine the basis of the land. The basis of the land should be equal to the sum of the investments made by Jacob, Ashley, and the cash received by Junco Corporation. Therefore, the basis of the land is:

$300,000 (investment by Jacob) + $100,000 (cash received by Ashley) + $300,000 (investment by Ashley) = $700,000

Thus, the correct answer is that Junco Corporation has a basis in the land of $700,000.

Jacob and Ashley Form Junco Corporation with the Following Investments