Question

In 2018, Stone, a cash basis taxpayer, incorporated her CPA practice. No liabilities were transferred. The following assets were transferred to the corporation: Cash (checking account) $ 500 Computer equipment Adjusted basis 30,000 Fair market value 34,000 Cost 40,000 Immediately after the transfer, Stone owned 100% of the corporation's stock. The corporation's total basis for the transferred assets is Group of answer choices

$30,000
$30,500
$34,500
$40,500

Answer 1

Answer:

$30,500

Explanation:

As stone receives compensation in the form of stock and is having 100% control over the corporation ( required is minimum 80%) the transaction qualifies for tax free transfer. (IRC 351). So, adjusted basis is taken into consideration for determining the basis for corporation ( under sec 362).

So the Corporations total basis for transfered assets =$500+$30000  =$30500