Roy transfers property with a tax basis of $800 and a fair market value of $500 to acorporation in exchange for stock with a fair market value of $400 and $50 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed aliability of $50 on the property transferred. What is Roy's tax basis in the stock receivedin the exchange?

Question

Quizplus · Accepted Answer

In a section 351 transaction, the transferor's basis in the stock received is equal to the basis of the property transferred, reduced by any liabilities assumed by the corporation. Therefore, Roy's basis in the stock received is:
$800 (tax basis of property) - $50 (liability assumed by corporation) = $750.

Roy Transfers Property with a Tax Basis of $800 and a Fair