Question

Terry forms the camphor corporation during the current year. she transfers property with a value of $700,000 to camphor corporation in exchange for 100 percent of the stock in the corporation. terry's basis in the property transferred was $400,000 and the corporation assumed a $275,000 mortgage on the property. if the fair market value of the stock received by terry is $450,000, what is the corporation's basis in the property received from terry?
a. $275,000
b. $125,000
c. $700,000
d. $400,000
e. $450,000

Answer 1

The answer is the letter "D" which is $400,000. It was clearly stated at the end of the problem that corporation's basis in the received is the same with Terry's basis in the property transferred which is the amount equal to $400,000.