Question

Required information [The following information applies to the questions displayed below. Zhang incorporated her sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation's stock. The property transferred to the corporation had the following fair market values and adiusted bases: Adjusted FMV Basis Building Land Total Inventory 64,000 32,000 480,000 736,000 320,000 960,000 $1,280,000 $1,312,000 The corporation also assumed a mortgage of $100,000 attached to the building and land. The fair market value of the corporation's stock received in the exchange was $1,180,000. The transaction met the requirements to be tax-deferred under §351 (Negative amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.) Assume the corporation assumed a mortgage of $1,380,000 attached to the building and land. Assume the fair market value of the building is now $800,000 and the fair market value of the land is $1,696,000. The fair market value of the stock remains $1,180,000 g. What is the corporation's adjusted basis in each of the assets received in the exchange? (Do not round intermediate calculations.) Inventory Building Land Adjusted basis

Answer 1

The corporation receives a carryover basis in the assets received from Zhang, reduced by the aggregate net built-in loss on the assets transferred, which is allocated to the land.

Inventory	$ 32,000.00
Building	$ 32,000.00
Land (960,000-32,000)	$928,000.00
Total	$992,000.00

Fair market value of stock received	$1,180,000.00
Mortgage assumed by corporation	$   100,000.00
Amount realized	$1,280,000.00
Adjusted tax basis of the property transferred	$1,312,000.00
Loss realized	$    (32,000.00)