Question

Harry forms the Nectarine Corporation during the 2019 tax year. To form the corporation, Harry transfers assets having a fair market value of $650,000 to Nectarine Corporation for 100 percent of the corporation's stock. Harry's adjusted basis in the assets transferred was $350,000 and Nectarine Corporation assume a $200,000 mortgage on the assets. If the fair market value of the stock received by Harry is $450,000, what is his basis in the stock received from the corporation

Answer 1

Answer:

150000

Explanation:

The question says that Harry received a fair market value = 450000 dollars

Meanwhile he transferred 650000 dollars of assets

Fair value of assets = 650000 - 200000 = 450000

Harry's adjusted basis = 350000

Therefore the share received will be:

350,000 - 200,000

= 150,000 dollars.

Harry's basis in the stock received from the corporation is $150,000.

Thank you!