Martin contributes property with an adjusted basis of $100,000 and a fair market value of $140,000 to a newly formed business entity.If the entity is an S corporation and the transaction qualifies under § 351,the S corporation's basis for the property and the shareholder's basis for the stock are: Asset Basis Stock Basis
A)$100,000 $140,000
B)$140,000 $100,000
C)$100,000 $100,000
D)$140,000 $140,000
E)None of the above.

Question

Quizplus · Accepted Answer

When a shareholder contributes property to a corporation in exchange for stock, the basis of the stock received is equal to the adjusted basis of the property contributed. In this case, Martin contributes property with an adjusted basis of $100,000, so his basis in the stock received would also be $100,000. The S corporation's basis in the contributed property is also $100,000, as this is the carryover basis from the shareholder's contribution.

Martin Contributes Property with an Adjusted Basis of $100,000 and a Fair