Francine Incorporated Her Sole Proprietorship by Transferring Inventory, a Building

question 45

Short Answer

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. $$\begin{array} { l r l r } & { \text { FMV } } & & { \text { Adjusted basis } } \\\hline\text { Inventory } & \$ 30,000 & & \$ 10,000 \\\text { Building } & 130,000 & & 80,000 \\\text { Land } & \underline { 50,000 } & & \underline { 100,000 } \\\text { Total } & \$ 210,000 & & \$ \underline { \underline { 190,000 } }\end{array}$$ 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.
What is Francine's basis in the stock she receives in her corporation?

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