Question

Brad, Scott, and Jake each contribute property to form BSJ Corporation. Brad contributes a building with a fair market value of $450,000 and a basis of $100,000 and receives 45% of the stock of BSJ. Scott contributes $100,000 cash and equipment with a fair market value and tax basis of $350,000, receiving 45% of the stock of BSJ. Jake contributes a collection of vintage automobiles with a fair market value of $150,000 and tax basis of $130,000 in exchange for 10% of the stock of BSJ and $50,000 cash. What tax basis will each take in their respective BSJ stock

Answer 1

Answer:

The answer is $700,000

Explanation:

From the example given, we find the tax basis will each take in their respective BSJ stock

Contributions done partner wise         (All values in $)

Partner  Contribution Tax Share in Stock  % of Tax   Base Tax base in stock

Name                               Base

Brad         450000        100000         45%          17%       120689.7

Scott 100000         350000         45%          60%     422413.8

Jake 150000          130000         10%          22%     156896.6

               700000           580000                      100%     700000

Therefore, The Total Assets contributed will be equivalent to stock of BSJ issued = $ 700,000