The corporation's adjusted tax basis for the assets received from Zhang's sole proprietorship—the inventory, building, and land—will be the same as Zhang's adjusted basis just prior to the transfer, in accordance with the tax laws governing such exchanges.
When Zhang incorporates her sole proprietorship into a corporation and transfers inventory, a building, and land to the corporation in exchange for 100 percent of the corporation's stock,
The corporation's adjusted tax basis in each of the assets received is generally the same as Zhang's adjusted basis just before the transfer.
This is due to the provisions of the Internal Revenue Code (IRC) Section 351 that allow for tax-free exchange
If the transferor (Zhang) is in control of the corporation immediately after the exchange, and certain other conditions are met.
However, the corporation must also consider the fair market values of these assets for book and accounting purposes.