[Ninja20]

Hi

I have this doubt. At the time of formation, if the contributor gets an 80% share after that, there would be no gain/ loss. But in this case, its a year after contribution by a 100% stockholder ? why should we still considered AB ? I thought it would be 68K,

I also remembering doing another question where a different shareholder contributed in Year 2 and had a taxable gain- so contribution at FMV. So why is it different here ?

Please help me with this question.

Feld, the sole stockholder of Maki Corp., paid $50,000 for Maki’s stock in Year 1. In Year 2, Feld contri­buted a parcel of land to Maki but was not given any additional stock for this contribution. Feld’s basis for the land was $10,000, and its fair market value was $18,000 on the date of the transfer of title. What is Feld’s adjusted basis for the Maki stock?

A.

$50,000

B.

$52,000

C.

$60,000

Incorrect D.

$68,000

You answered D. The correct answer is C.

Because Feld is the only shareholder, his basis in the stock of Maki Corp. will include any future contributions of property to the corporation. Therefore, Feld’s basis in the Maki Corp. stock will become $60,000, computed as follows:

Adjusted basis of initial investment in Year 1 $50,000

+ Adjusted basis of land contribution 10,000

---

= Adjusted basis of Maki Corp. stock to Feld $60,000

[Anonymous]

Since Field is the only shareholder, he controls 80% or more. When you own 80% in corp at date of contribution, use Adj. Basis, not FMV.

If Field was 79%, the answer would be $50,000 cash + $18,000 FMV land=$68,000.

Hope this helps.

[Ninja20]

Thank you!

So if the person ALREADY owns 80%, he can still contribute and would be considered at AB.

So if we have a situation where A owns 75% already , NEXT YEAR B contributes 10%, B's contribution will be at FMV ? A and B jointly own 80%. How does it work here ?

[Author]

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