Let us assume that Carla 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 Tax-Adjusted Basis
Inventory $ 20,000 $ 10,000
Building 150,000 100,000
Land 250,000 300,000
Total $ 420,000 $ 410,000
The corporation also assumed a mortgage of $120,000 attached to the building and land. The fair market value of the corporation's stock received in the exchange was $300,000.
a. What amount of gain or loss does Carla realize on the transfer of the property to his corporation?
b. What amount of gain or loss does Carla recognize on the transfer of the property to her corporation?
c. What is Carla's basis in the stock she receives in his corporation?
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