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 adjusted bases: Adjusted Basis Inventory$ FMV 56,000 $ 28,000 280,000 644,000 840,000 Building 420,000 Land Total $1,120,000 $1,148,000 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 $1,020,000. The transaction met the requirements to be tax-deferred under $351. (Negative amount should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.) Assume the corporation assumed a mortgage of $1,220,000 attached to the building and land. Assume the fair market value of the building is now $700,000 and the fair market value of the land is $1,484,000. The fair market value of the stock remains $1,020,000. g. What is the corporation's adjusted basis in each of the assets received in the exchange? (Do not round intermediate calculations.) Answer is complete but not entirely correct. Inventory Building Land Adjusted basis $ 28,000 $ 0 $264,000 ×

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

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 adjusted bases:

	FMV		Adjusted Basis
Inventory	$	56,000		$	28,000
Building		420,000			280,000
Land		644,000			840,000
Total	$	1,120,000		$	1,148,000

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 $1,020,000. The transaction met the requirements to be tax-deferred under §351. (Negative amount should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)

Assume the corporation assumed a mortgage of $1,220,000 attached to the building and land. Assume the fair market value of the building is now $700,000 and the fair market value of the land is $1,484,000. The fair market value of the stock remains $1,020,000.

g. What is the corporation’s adjusted basis in each of the assets received in the exchange?