Francine incorporated her sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation's stock. The property transferred to the corporation had the following fair market values and tax-adjusted bases. FMV Adjusted basisInventory$30,000 $10,000Building 130,000 80,000Land 50,000 100,000Total$210,000 $190,000 The corporation also assumed a mortgage of $60,000 attached to the building and land. The fair market value of the corporation's stock received in the exchange was $150,000.a. What amount of gain or loss does Francine realize on the transfer of the property to her corporation?b. What amount of gain or loss does Francine recognize on the transfer of the property to her corporation?c. What is
Francine's basis in the stock she receives in her corporation?
What will be an ideal response?
a. $20,000
b. Francine does not recognize any gain or loss on the transfer because the requirements of §351 are met and no boot is received in the exchange.
c. $130,000
a.
| Fair market value of stock received | $ | 150,000 |
| + Mortgage assumed by corporation | 60,000 | |
| Amount realized | $ | 210,000 |
| ? Adjusted tax basis of the property transferred | 190,000 | |
| Gain realized | $ | 20,000 |
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