TCP SIM

Question 1

When someone contributes property in exchange for ownership in a business (whether C corporation or partnership), their basis is usually equal to the _______ basis less any __________ the business assumes.

Answer 1

CONTRIBUTOR’S, LIABILITIES

So, whatever the person’s basis was, that is their tax basis, less any liabilities (like a mortgage) that the business assumes.

Question 2

What ownership percentage does someone have to have in a C Corporation after an exchange of property in return for ownership, for the contribution of property to NOT be taxed?

Answer 2

AT LEAST 80%