IPM and Zeta's Tax Basis in IPeta Incorporated Stock and Transferred Assets

What is IPM and Zeta's tax basis in their IPeta stock and IPeta's aggregate tax basis in the transferred assets?

Multiple Choice

IPM's basis $283,000; Zeta's basis $450,000; IPeta's basis $733,000

IPM's basis $283,000; Zeta's basis $98,000; IPeta's basis $381,000

IPM's basis $675,000; Zeta's basis $450,000; IPeta's basis $1,125,000

None of these choices are correct

Answer:

The correct answer is: None of these choices are correct.

To determine IPM and Zeta's tax basis in their IPeta stock and IPeta's aggregate tax basis in the transferred assets, we need to allocate the total FMV of the transferred assets among IPM and Zeta based on the proportion of shares received.

Here's the calculation:

IPM's Basis in IPeta Stock:

IPM received 600 shares out of the total 1,000 shares, which represents 60% ownership.

Allocating the total FMV of $675,000 based on ownership:

IPM's basis = 60% of $675,000 = $405,000

Zeta's Basis in IPeta Stock:

Zeta received 400 shares out of the total 1,000 shares, which represents 40% ownership.

Allocating the total FMV of $675,000 based on ownership:

Zeta's basis = 40% of $675,000 = $270,000

IPeta's Aggregate Basis in Transferred Assets:

To determine IPeta's aggregate tax basis in the transferred assets, we add the individual bases of IPM and Zeta.

IPeta's basis = IPM's basis + Zeta's basis

IPeta's basis = $405,000 + $270,000 = $675,000

Therefore, the correct answer is:

IPM's basis in IPeta stock: $405,000

Zeta's basis in IPeta stock: $270,000

IPeta's aggregate basis in the transferred assets: $675,000