[Biff-1955-Tannen]

Am I reading this wrong, or does this questions either have wrong wording in the explanation, or wrong figures in the question? So when property is transferred to a corporation, it is transferred at FMV?

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:

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Porter’s Transfer

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Corley’s Transfer

Basis

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$50,000

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$250,000

Fair market value- 200,000

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500,000

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

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

[Biff-1955-Tannen]

… never mind I just realized the FMV was 50k two years ago when it was received, making that its basis

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

99% Ninja MCQ only

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