In April, X and Y formed Z Corp. X contributed $50,000 cash, and Y contributed land worth $70,000 (with an adjusted basis of $40,000). Y also received $20,000 cash from the corporation. X and Y each receives 50% of the corporation's stock. What is the tax basis of the land to Z Corp.? A. $40,000 B. $50,000 C. $60,000 D. $70,000
The tax basis of the land to Z Corp. would be $40,000. This is because when property is transferred to a corporation in exchange for its stock, the corporation's basis in the received property is the same as the adjusted basis of the property in the hands of the transferor. In this case, Y's adjusted basis in the land was $40,000, so when Y transferred the land to Z Corp., the corporation's basis in the land also became $40,000. Therefore, the correct answer is A. $40,000.
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