Problem 5: Determine the basis of stock in the hands of the shareholder in each of the following instances

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Problem 5: Determine the basis of stock in the hands of the shareholder in each of the following instances. Assume that the 80% rule is met in all cases.

Contribution of property with a basis of $2,000 and an FMV of $2,800.

A shareholder’s stock in hand is equivalent to the contribution of property. Hence, in this respect, the basis is $2,000

Contribution of property with a basis of $6,000 and an FMV of $7,600. The stockholder also received $1,000 cash from the corporation as part of the stock transaction.

Shareholders will report a gain of $1,000 and an FMV of $6,000 from property.

The basis will be= 6,000+1,000 -1,000

=$6,000.