Question

Q6 -Evan is the sole shareholder of Corporation. Evan transferred real estate to Corporation in exchange for all of the stock of Corporation. The real estate was a capital asset in Evan’s hands and will also be a capital asset when held by the corporation. Evan’s basis in the real estate was $10,000 and the value of the real estate was $8,000 on the date of the transfer. If Evan received $2,000 in cash and 100 shares of stock from the corporation in exchange for the real estate, the resulting bases for Evan’s stock and the corporations real estate are:

A-Evan’s stock basis is $10,000; Corporation’s basis in the real estate is $10,000

B-Evan’s stock basis is $6,000; Corporation’s basis in the real estate is $12,000

Answer 1

I cannot find the correct option for the question given, may be u missed out adding all the options for the question,

Evans stock basis is cash received + value of real estate transferred = 2,000 + 8,000 = 10,000.

Corporations basis in the real estate, here we should consider only the value of real estate and the cash given should not be considered because we are calculating value of real estate transferred and that will be 8,000.

Therefore answer is, Evans stock basis in 10,000 and corporations basis in real estate is 8,000.