Tristan transfers property with a tax basis of $900 and a fair market value of $1,200 to a corporation in exchange for stock with a fair market value of $900 and $200 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed aliability of $100 on the property transferred. What is the corporation's tax basis in the property received in the exchange?

Question

Quizplus · Accepted Answer

The corporation's tax basis in the property received in the exchange is equal to the tax basis in the property prior to the exchange plus any gain recognized or minus any loss recognized minus any liabilities assumed.

In this case, the tax basis in the property prior to the exchange was $900. No gain or loss is recognized because the exchange qualifies for deferral under section 351. The corporation assumed a liability of $100, which reduces the tax basis in the property received.

Therefore, the corporation's tax basis in the property received is $900 (tax basis before the exchange) - $100 (liability assumed) = $1,100.

Tristan Transfers Property with a Tax Basis of $900 and a Fair