A transfers machines valued at $170,000 (basis = $150,000) along with $30,000 cash to AB Corporation and B transfers real property valued at $320,000 (basis = $310,000) to the corporation. A receives 40 percent of the outstanding stock and B receives 60 percent. B also receives $20,000 from the corporation. What is AB Corporation's basis for the machines?
A) $150,000
B) $160,000
C) $170,000
D) $180,000

Question

A transfers machines valued at $170,000 (basis = $150,000) along with $30,000 cash to AB Corporation and B transfers real property valued at $320,000 (basis = $310,000) to the corporation. A receives 40 percent of the outstanding stock and B receives 60 percent. B also receives $20,000 from the corporation. What is AB Corporation's basis for the machines?
A) $150,000 
B) $160,000
C) $170,000
D) $180,000

Quizplus · Accepted Answer

AB Corporation's basis for the machines is the transferor's basis, which is $150,000, because the transfer qualifies as a tax-free exchange under IRC Section 351.

A Transfers Machines Valued at $170,000 (Basis = $150,000) Along