Jeff Stein incorporated his 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 value and adjusted bases. FMV Adjusted Basis Inventory $30,000 $45,000 Building 150,000 120,000 Land 180,000 90,000 Total $360,000 $255,000
Jeff Stein incorporated his 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 value and adjusted bases.
|
|
FMV |
Adjusted Basis |
|
Inventory |
$30,000 |
$45,000 |
|
Building |
150,000 |
120,000 |
|
Land |
180,000 |
90,000 |
|
Total |
$360,000 |
$255,000 |
The fair market value of the corporation’s stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Jeff. The transaction met the requirements to be tax-deferred under §351.
a. What amount of gain or loss does Jeff realize on the transfer of the property to his corporation?
b. What amount of gain or loss does Jeff recognize on the transfer of the property to her corporation?
c. What is Jeff’s basis in the stock he receives in his corporation?
d. What is the corporation’s adjusted basis in each of the assets received in the exchange?
e. Would the stock held by Jeff qualify as §1244 stock? Why is this determination important to Jeff?
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