Harry Forms the Nectarine Corporation During the Current Tax Year

Harry forms the Nectarine Corporation during the current tax year.To form the corporation, Harry transfers assets having a fair market value of $650,000 to Nectarine Corporation for 100 percent of the corporation's stock.Harry's adjusted basis in the assets transferred was $375,000 and Nectarine Corporation assumed a $200,000 mortgage on the assets.If the fair market value of the stock received by Harry is $450,000, what is his basis in the stock received from the corporation?

A) $175,000
B) $200,000
C) $375,000
D) $450,000
E) None of the above

Correct Answer:

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