Unformatted text preview: erred other property in exchange for Jet stock as follows: Clark
Hunt Other property
of Jet stock
60% What was Clark's basis in Jet stock?
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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- Fall '10
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