Question

ransfers real estate worth $180,000 (basis of $40,000) andservices (worth $20,000) rendered in organizing the corporation. Each is issued 600 shares in Red Corporation. With respect to the transfers_____________.

Answer 1

Answer:

Emily has a basis of $60,000 in the shares of Red Corporation.

Explanation:

Emily's basis for Red Corporation's stock = real estate ($40,000)  + service ($20,000) = $60,000

Sarah's basis for Red Corporation's stock = computers ($80,000) = $80,000

Even though both Emily and Sarah received 600 shares each, the basis for her tax calculations are different.