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Ted needs to put additional capital into his solely owned corporation in order to comply with changes in his state's capitalization requirements. Ted is considering contributing a piece of property to the corporation in a §351 transaction. The property has a fair market value of $1 million, an adjusted basis of $200,000, and it already has debt attached of $500,000, which would be transferred along with the property. This money was borrowed long before the state changed its requirements. Ted would also contribute a promissory note in the amount of $300,000.

Research question:Would Ted have to recognize gain on this transaction? If so, how much?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9965723

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