Question

Ramon incorporated his 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	$	14,500		$	5,600
Building		61,000			52,000
Land		156,000			55,500
Total	$	231,500		$	113,100

The fair market value of the corporation’s stock received in the exchange equaled the fair market value of the assets transferred to the corporation by Ramon. (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.)

a. What amount of gain or loss does Ramon realize on the transfer of the property to his corporation?

b. What amount of gain or loss does Ramon recognize on the transfer of the property to his corporation?

c. What is Ramon’s basis in the stock he receives in his corporation?

Answer 1

Ans:

1. Amount of gain or loss does Ramon realize on the transfer of the property to his corporation:

=> Fair Market Value of Stock Received- Adjusted Tax basis of the property Transferred

=> 231,500-113,100

=> 118,400

2. Amount of gain or loss does Ramon recognize on the transfer of the property to his corporation"

=> Since, Section 351 is met which means Section 351(a) provides that no gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control and No boot received is received in exchange for the same therefore amount of gain or loss recognized is nil

3. Ramon’s basis in the stock he receives in his corporation will be adjusted value of the assets i.e. $113,100