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Basis for property owned by person and corporation, and tax

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I have this problem for a practice exam, and am stumped. For the corporation's basis of $40,000, since corporations don't get stepped-up basis, however I am not sure if that is right. Parts b-d I really don't have a clue (was eric's basis $100,000 or $125,000?), and would appreciate help from a qualified professional.

Problem: Eric transferred property with a basis of $100,000 and a fair market value of $125,000 to his 100% controlled corporation. The property was subject to a note payable to the bank for $60,000. Compute the following:

a. The corporation's basis in the property.

b. Eric's basis in the stock.

c. When the corporation was in the 22% marginal tax bracket, the corporation sold the property contributed by Eric for $125,000 and distributed to Eric an amount equal to the after tax gain. Eric was in the 20% marginal tax bracket. Compute the total tax on the gain and distribution.

d. What is the corporation's basis in the property assuming Eric's basis was $100,000 and its fair market value was $80,000 at the time that Eric made the transfer for stock?

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This solution illustrates how to compute the basis for property owned by person and corporation, and total tax.

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Please see the attached Word 97-2003 document.

Eric transferred property with a basis of $100,000 and a fair market value of $125,000 to his 100% controlled corporation. The property was subject to a note payable to the bank for $60,000. Compute the following:

a. The corporation's basis in the property.

IRC section 351(a) states that "No gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control (as defined in section 368(c)) of the corporation." IRC section 357(a) states that "Except [if the transfer is for a tax avoidance purpose or the liability assumed exceeds the transferor's adjusted basis in the property transferred], if ... the taxpayer receives property which would be permitted to be received under section 351 or 361 without the recognition of gain if it were the sole consideration, and ... as part of the consideration, another party to the exchange assumes a liability of the taxpayer, then such assumption shall not be treated as money or other ...

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