[Anonymous]

Person A contributes a property with NBV of $400,000 and cash of $10,000. Received $20,000 cash from the corporation, what is corporation’s basis?

I find corporate formation the most confusing topic of all for corporation.

[Whopper Warrior]

I beleive the answer would be 420k because the guy has boot of 20k and a basis of 400k, and would have to recognize it as a gain. If memory serves the 10k is not netted as is the case for net debt relief.

proposed JE

equipment (dr) 420,000

cash (dr) 10,000

cash (cr) 20,000

capital account (cr) 410,000

It has been awhile since I have done this, but I do believe this is correct.

ALL 4 parts passed summer 13
Ethics October 13
Experience (waiting)

Becker Only

[Whopper Warrior]

I beleive the answer would be 420k because the guy has boot of 20k and a basis of 400k, and would have to recognize it as a gain. If memory serves the 10k is not netted as is the case for net debt relief.

proposed JE

equipment (dr) 420,000

cash (dr) 10,000

cash (cr) 20,000

capital account (cr) 410,000

It has been awhile since I have done this, but I do believe this is correct.

ALL 4 parts passed summer 13
Ethics October 13
Experience (waiting)

Becker Only

[Author]

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