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RR_CPA
Major Contributor

Joined: 02 Mar 2009
Location: Canada
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Posts: 338

Posted: 09 Jan 2010 at 11:17 \| IP Logged

What is the difference between the followings...

- Corporation's Ajusted Basis on transferred property

- Corporation's Cost Basis on transferred property

- Corporation's Tax Basis on Transferred property

For example A transfers property with adjusted basis of $5,000 with FMV $15,000 for 500 common stock of the corporation at price $100/share.

EAK5455
Regular
Regular

Joined: 08 Jan 2010
Location: United States
Online Status: Offline
Posts: 107

Posted: 09 Jan 2010 at 15:37 \| IP Logged

Cost basis. This is the total amount capitalized in the acquisition of the asset (purchase price, back taxes, installation fees, etc.).

Adjusted basis. This is the cost basis less any amount of related depreciation / amortization expense. Adjusted basis could be used in both the
context of book basis and tax basis.

Tax basis. This is the cost basis less allowable Sec. 179 expense, bonus depreciation, and MACRS depreciation previously claimed for the asset.

In your example, A's basis of $5,000 would only transfer to the corporation under a Sec. 351 transaction. Instead, the FMV of A's property would be
assume by the corporation.

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