The amount of cash that clark contributed must also

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Unformatted text preview: erred other property in exchange for Jet stock as follows: Clark Hunt Other property Fair Adjusted market value basis $ 50,000 $100,000 120,000 240,000 Percentage of Jet stock acquired 40% 60% What was Clark's basis in Jet stock? a. b. c. d. $0 $100,000 $110,000 $160,000 CPA-02075 Explanation Choice "c" is correct. The formation of a corporation under these conditions is a nontaxable event. Clark's basis will be the $60,000 cash he contributed plus the $50,000 adjusted basis of the non-cash property for a total of $110,000. Choice "a" is incorrect. Clark contributed both cash and property. Thus, Clark's basis in Jet's stock is greater than zero. Choice "b" is incorrect. The amount of cash that Clark contributed must also be considered in determining Clark's basis in Jet stock. Choice "d" is incorrect. When property is contributed to form a corporation, it is contributed at its adjusted basis, not at its fair market value. CPA-02083 Type1 M/C A-D 29. CPA-02083 ARE Nov 95 #23 Corr Ans: A PM...
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