There are many affine subalgebras of polynomial rings with highly non-trivial projective modules, whose initial algebras (toric degenerations) are still finitely generated and have all projective modules free. Let k[X1, . . . , Xn] be a polynomial algebra (k a field, n ∈ N) and A an affine k-subalgebra. Let ≺ denote a term order on the multiplicative semigroup of monomials in the Xi and let in≺(A) denote the monomial subalgebra of k[X1, . . . , Xn], generated by the leading monomials of elements f ∈ A with respect to ≺. In case the initial algebra in≺(A) is finitely generated, one can obtain many properties of A by checking them for in≺(A) (called sometimes a toric degeneration of A) (see [CHV], [RS]). However, this is not the case for the property ‘all projective modules are free’ – thanks to Bernd Sturmfels for asking me this question. Theorem 1. Let A = k[X, Y, Z, Z − XY Z] and ≺ be the lexicographic term order corresponding to Z ≺ Y ≺ X. Then SK0(A) = Ker(K0(A) det → Pic(A)) is not trivial (equivalently, there are projective A-modules which are not even stably of type free⊕rank 1), while in≺(A) is finitely generated and all projective in≺(A)-modules are free. (Here ‘projective’ includes ‘finitely generated’.) Proof. Since (Z2−XY )k[X, Y, Z] ⊂ A, the following diagram with the upper horizontal identity embedding is a pull-back diagram (all the letters refer to variables) A −−−−→ k[X, Y, Z] y y k[U, V ] −−−−→ k[S, ST, T ] , where X 7→ S, Y 7→ T , Z 7→ ST , U 7→ S, V 7→ T . It is similarly easy to show that in≺(A) = k[X, Y, Z, XY Z] – a seminormal monomial algebra (as a kvector space it is generated by the normal monomial subalgebras k[X, Y ], k[X, Z], k[Y, Z] and k[{XaY bZc|a > 0, b > 0, c > 0}]). So by [Gu1] projective modules over in≺(A) are free, while the Mayer-Vietoris sequence (see [Bass], p.490), applied to the diagram above, implies SK0(A) = SK1(k[S, ST, T ]). Hence, by [Gu2] SK0(A) 6= 0. Received by the editors February 20, 1998. 1991 Mathematics Subject Classification. Primary 13D15, 19A49. This research was supported in part by the Alexander von Humboldt Foundation and CRDF grant #GM1-115. c ©1999 American Mathematical Society