Question

Kamir and Javon form KJ Corporation, with each receiving 50% of the stock. Kamir contributes equipment with a fair market value of $100,000 and an adjusted basis of $55,000, as well as services with a value of $15,000. Javon contributes $115,000 in cash. What is Kamir’s basis in the KJ stock?

Answer 1

Adjusted basis for Kamir's share = $70,000

Step-by-step explanation:

Adjusted basis for any share, is the original cost or value, and does not represent fair value, for any share.

Therefore, for calculating the adjusted basis for Kamir, the original value of all the contributions made by him will be considered.

His contributions are:

Equipment with fair value = $100,000 and adjusted basis = $55,000

Services with a value = $15,000

As for equipment adjusted basis is provided, therefore, that will be considered, and for services assuming this is the adjusted basis as not provided, $15,000 will be considered.

Therefore, adjusted basis for Kamir's share = $55,000 + $15,000 = $70,000.