Brad, Scott, and Jake each contribute property to form BSJ Corporation. Brad contributes a building with a fair market value of $450,000 and a basis of $100,000 and receives 45% of the stock of BSJ. Scott contributes $100,000 cash and equipment with a fair market value and tax basis of $350,000, receiving 45% of the stock of BSJ. Jake contributes a collection of vintage automobiles with a fair market value of $150,000 and tax basis of $130,000 in exchange for 10% of the stock of BSJ and $50,000 cash. What tax basis will each take in their respective BSJ stock

Question

Business

Martha Rivas

11 September, 10:15

Brad, Scott, and Jake each contribute property to form BSJ Corporation. Brad contributes a building with a fair market value of $450,000 and a basis of $100,000 and receives 45% of the stock of BSJ. Scott contributes $100,000 cash and equipment with a fair market value and tax basis of $350,000, receiving 45% of the stock of BSJ. Jake contributes a collection of vintage automobiles with a fair market value of $150,000 and tax basis of $130,000 in exchange for 10% of the stock of BSJ and $50,000 cash. What tax basis will each take in their respective BSJ stock

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Answers (1)

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Matteo Finley · Answer 1

The answer is $700,000

Explanation:

From the example given, we find the tax basis will each take in their respective BSJ stock

Contributions done partner wise (All values in $)

Partner Contribution Tax Share in Stock % of Tax Base Tax base in stock

Name Base

Brad 450000 100000 45% 17% 120689.7

Scott 100000 350000 45% 60% 422413.8

Jake 150000 130000 10% 22% 156896.6

700000 580000 100% 700000

Therefore, The Total Assets contributed will be equivalent to stock of BSJ issued = $ 700,000