[simpleinterest]

I thought adjusted basis of the property contributed was used to determine shareholder basis, but take a look at this answer from CPA Review for Free:

In most cases, the basis of property transferred to a corporation is the fair value of the shares received (or $160,000 for this problem). A more formal way of making the determination is that the basis is Martha’s previous basis plus any gain recognized on the transfer. In this case, she does not own enough stock for the transfer to qualify for tax-free treatment, so she has a gain of $40,000. The basis was $120,000 and the fair value is $160,000 for a gain of $40,000. Her basis in the stock will be the old basis of $120,000 plus this gain of $40,000 or $160,000.

They’re saying it’s the basis of the property received…. which is it?

FAR 69, 85
AUD 84
BEC 85
REG 66, 87