Rob and Fran form Bluebird Corporation with the following investments. Adjusted Basis Fair Market Value From Rob
Question:
Rob and Fran form Bluebird Corporation with the following investments.
Adjusted Basis | Fair Market Value | |
From Rob— | ||
Cash | $400,000 | $400,000 |
From Fran— | ||
Land | 600,000 | 440,000 |
Each receives 50% of Bluebird’s stock. In addition, Fran receives cash of $40,000. One result of these transfers is that Fran has a:
a. Recognized loss of $160,000.
b. Basis of $560,000 in the Bluebird stock (assuming Bluebird reduces its basis in the land to $440,000).
c. Basis of $400,000 in the Bluebird stock (assuming Bluebird reduces its basis in the land to $440,000).
d. Basis of $480,000 in the Bluebird stock (assuming Bluebird reduces its basis in the land to $440,000).
e. Basis of $440,000 in the Bluebird stock, because her basis exceeded the fair market value of the land she contributed.
South-Western Federal Taxation 2019 Essentials Of Taxation Individuals And Business Entities
ISBN: 9781337702966
22nd Edition
Authors: William A. Raabe, James C. Young, Annette Nellen, David M. Maloney