Question

"Ramona and Hermione formed Wiley Corporation on January 2. Ramona contributed cash of $290,000 in return for 50 percent of the corporation’s stock. Hermione contributed a building and land with the following fair market values and adjusted tax bases in return for 50 percent of the corporation’s stock:

\[ \begin{align✕}
\text{Building:} & \quad \text{FMV } $108,750, \text{ Adjusted Tax Basis } $29,000 \\
\text{Land:} & \quad \text{FMV } $253,750, \text{ Adjusted Tax Basis } $116,000 \\
\text{Total:} & \quad \text{FMV } $362,500, \text{ Adjusted Tax Basis } $145,000 \\
\end{align✕} \]
To equalize the exchange, Wiley Corporation paid Hermione $72,500 in addition to her stock.
What is Ramona's tax basis in the stock received in return for the contribution of property to the corporation?


1. $145,000
2. $362,500
3. $290,000
4. $217,500"

Answer 1

Ramona's tax basis in the stock received in return for the contribution of property to the corporation is $362,500.

Step-by-step explanation:

Ramona's tax basis in the stock received in return for the contribution of property to the corporation is $362,500. The tax basis for each asset contributed to the corporation is determined based on the fair market value (FMV) at the time of contribution. Since Ramona contributed cash of $290,000 and Hermione contributed a building and land with a total FMV of $362,500, the tax basis for Ramona's stock is equal to the total FMV of the contributed assets.