Dick, a cash basis taxpayer, incorporates his sole proprietorship. He transfers the following items to the...
Dick, a cash basis taxpayer, incorporates his sole proprietorship. He transfers the following items to the newly created Orange Corporation.
Adjusted Fair Market Basis Value
Cash $ 10,000 $ 10,000
Building 120,000 175,000
Mortgage payable (secured by the building and held for 15 years) 100,000 100,000
With respect to this transaction:
a. rick's basis in the orange stock is $30,000
b. rick has a recognized gain of $100,000
c. orange corporation's basis in the building is $175,000
d. rick has a recognized gain of $75,000
Homework Answers
Answer: c
Basis in the building is $175,000.
The fair market value should be considered for basis.
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Dick, a cash basis taxpayer, incorporates his sole
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