Mandel transferred property to his new corporation in a section 351 transaction. One of the properties transferred was land with a fair market value of $200,000 and a tax basis of $250,000. In all cases, the corporation will always take a tax basis in the land of $200,000 to prevent the "built-in loss" from being transferred from Mandel to the corporation.
The built-in loss rules only apply if the aggregate fair market value of the properties transferred is less than the aggregate tax basis of the properties transferred.

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The built-in loss rules also apply if the fair market value of any property transferred is less than its tax basis. In this case, there is a built-in loss of $50,000 ($200,000 fair market value - $250,000 tax basis), so the corporation's tax basis in the land will be $200,000 to prevent the transfer of the built-in loss.

Mandel Transferred Property to His New Corporation in a Section