Janet Geist, who owns 400 shares of Q. X. Computers, Inc., makes an additional c

Question

Janet Geist, who owns 400 shares of Q. X. Computers, Inc., makes an additional contribution of $4,000 in cash and property with a fair market value of $6,000 (and an adjusted basis of $3,000) to help fund the corporation's expansion plans. Which one of the following statements is not correct? a. Janet does not have to recognize any gain on the transfer of property to the corporation. b. Janet's basis in her 400 shares is increased by $10,000. c. Q. X. Corporation does not have to include any amount in its gross income. d. Q. X. Corporation's basis in the property contributed is $3,000. Janet Geist, who owns 400 shares of Q. X. Computers, Inc., makes an additional contribution of $4,000 in cash and property with a fair market value of $6,000 (and an adjusted basis of $3,000) to help fund the corporation's expansion plans. Which one of the following statements is not correct?

Explanation / Answer

The answer is option (b). "Janet's basis in her 400 shares is incresed by $10,000". As this statement is not correct, because Janet's not purchased the shares of worth $10,000, although she contributed on assests such as cash of $4,000 and property with a fair market value of $6,000 (adjusted basis value $3,000) but these contributions will not increase value of her 400 shares.

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