Phillip incorporates his sole proprietorship, transferring it to newly formed bl
ID: 2611485 • Letter: P
Question
Phillip incorporates his sole proprietorship, transferring it to newly formed black corporation. The assets transferred have an adjusted basis of $240000 and fair market value of $400000. Also transferred was $100000 in liabilities, $10000 of which was personal, the balance of $90000 being business related. In return for these transfers, Phillip receives all of the stock in Black corporation. Which of the following statements is correct?
a. Black Corporation will have a basis of $250000 in the property.
b. Black Corporation will have a basis of $240000 in the property.
c. Phillip’s basis in the Black Corporation stock will be $241000
d. Phillip’s will have a recognized gain of $10000
e. Phillip’s will have a recognized gain of $100000
Explanation / Answer
The answer will be b. Black Corporation will have a basis of $240000 in the property.
As his personal liabilities won't be carried to corporation and it will be adjusted through his proprietorship assets