What is devon tax basis in the stock he receives

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Question - Sam and Devon agree to go into business together selling college-licensed clothing. According to the agreement, Sam will contribute inventory valued at $100,000 in return for 80 percent of the stock in the corporation. Sam's tax basis in the inventory is $60,000. Devon will receive 20 percent of the stock in return for providing accounting services to the corporation (these qualify as organizational expenditures). The accounting services are valued at $25,000.

Assume Devon received 25 percent of the stock in the corporation in return for his services.

Required - What is Devon's tax basis in the stock he receives in return for his contribution of services to the corporation?

Reference no: EM133170586

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