What basis will Cardinal Corporation have in the land once Carl transfers it?

When determining the basis that Cardinal Corporation will have in the land transferred by Carl, it is important to understand the concept of basis in the context of property transactions. The basis of property received in a transfer typically is equal to the transferor’s basis plus any gain recognized by the transferor, though generally corporate transfers do not result in recognized gain or loss.

If Carl transfers the land to Cardinal Corporation, the basis that Cardinal will take in the land is based on Carl's adjusted basis for the land prior to the transfer. In this scenario, if Carl's adjusted basis in the land was $140,000, that amount becomes Cardinal Corporation's basis in the land.

This approach follows tax principles, particularly in corporate transactions, where the stock and assets can be transferred without immediate recognition of gain or loss unless specific circumstances apply. The corporation takes the transferred property at the transferor's basis plus any additional adjustments applicable.

Therefore, since the correct calculation indicates that Cardinal Corporation will take over Carl's basis, the basis in the land once transferred will indeed be $140,000.