[Biff-1955-Tannen]

Is the corporations basis the same basis as for the owners, or is it the FMV? Two questions have given me different answers. Is it relevant if it is contributed during the formation of the corporation? That’s the only difference I can see between the two following explanations.

Q# 1321

Ames and Roth formed Homerun, a C corporation. Ames contributed several autographed baseballs to Homerun. Ames purchased the baseballs for $500, and they have a total fair market value of $1,000. Roth contributed several autographed baseball bats to Homerun. Roth purchased the bats for $5,000, and they have a fair market value of $7,000. What is Homerun’s basis in the contributed bats and balls?

A.

$0

B.

$5,500

C.

$6,000

D.

$8,000

“Because Ames and Roth formed the C corporation called Homerun, the new corporation should report the same basis for assets contributed by the owners ($500 + $5,000). There is no reason for a step up in basis above the cost of acquisition.

No gain or loss is recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and immediately after the exchange the persons are in control (80% or more) of the corporation.”

Q#1575

Porter, the sole shareholder of Preston Corp., transferred property to the corporation as a contribution to capital. Two years later, Corley transferred property to the corporation in exchange for a 10% interest in corporate stock. The property transferred was valued as follows:

Porter’s Transfer Corley’s Transfer

Basis $50,000 $250,000

Fair market value 200,000 500,000

What amount represents the corporation’s basis in the property received?

A.

$700,000

B.

$550,000

C.

$450,000

D.

$300,000

“When property is transferred to a corporation, the basis of any property received is the fair market value (FMV) at the time of the transfer. Porter’s transfer two years ago had an FMV of $50,000, but the current FMV does not have an impact on the corporation’s basis in the property. The basis in Corley’s contribution is the current FMV, and their basis in the property does not affect the corporation’s basis. The total basis in property contributed to the corporation is the $50,000 original contribution (FMV) from Porter, plus the $500,000 current contribution (FMV) for Corley, which equals a total of $550,000.”

AUD 93 Jan 16
BEC 83 Feb 16
FAR 83 Apr 16
REG 84 May 16

99% Ninja MCQ only

[monikernc]

there are so many rules for property in and out of each entity – this website has been helpful
https://tax.cchgroup.com/downloads/files/contemporary-tax-practice/Module2/Topic2/A-Sec-351-Transfers-Basic-Requirements.asp

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[c1oth]

Thank you @ monikernc

[Tncincy]

@Monikernc, and others here, What's you guys study schedule like…..

It begins with a 75
Been here too long as a cheerleader....ready to pass

[monikernc]

i am in final review for test on 5/23. i am working mcq's and repeating through the sims. i have a 3 day, all study weekend, starting today. i do at lest 30 questions every morning then again at night with sims thrown in. this weekend i need to really nail all the basis concepts. i find the AL ridiculously difficult to search but have learned the structure of the IRC. the UCC is hard to find things and the language is difficult. i find the sims are very helpful to help nail stuff.

how are you doing?

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Tncincy]

I'm up early trying to put in real study time since tax season is over…..I am still at the mcq taking notes stage, (not doing too well) but I think it will click as I put in more time. I forgot all about the irc and ucc, I'm waiting on sims, don't know why, the sooner I am comfortable with all the material the better the chances of passing. This may be a power weekend for me.

It begins with a 75
Been here too long as a cheerleader....ready to pass

[monikernc]

i did the sims as i completed each ninja chapter and found they do help me grasp concepts. doing them again helps me recall info that i need to remember during the review. surprisingly, i have taken fewer notes for this section than any other. i printed a lot of IRS forms to assist in understanding – the 1065, 1065 k1, the 1120s, and 1120s k1 and the 1120 are very helpful to look at while answering questions. i also have the 1040 with schedules A B C D and E printed. i use my textbook a lot for the basis questions

to be clear, i still have new biz law questions to complete but i am in full review on the tax portion

i want to pass on 5/23 not hit it out of the park – these last couple of months have been a little strange for me. life, and all.

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Tncincy]

@monikernc: you posted some sites or links on basis can you repost those….I have been looking all over for them.

It begins with a 75
Been here too long as a cheerleader....ready to pass

[monikernc]

I think it is this one

there are so many rules for property in and out of each entity – this website has been helpful https://tax.cchgroup.com/downloads/files/contemporary-tax-practice/Module2/Topic2/A-Sec-351-Transfers-Basic-Requirements.asp – See more at: https://www.another71.com/cpa-exam-forum/topic/corporations-basis-in-property-received?replies=24#post-929171

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Tncincy]

oh…it was right here….thanks anyway….I got it.

It begins with a 75
Been here too long as a cheerleader....ready to pass

[Author]

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