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 are A's and B's recognized gains or losses,respectively,on these transfers?
A)$20,000,0
B)0,$20,000
C)0,$10,000
D)0,0
E)None of the above

Question

Quizplus · Accepted Answer

A does not recognize any gain because the transfer qualifies for non-recognition under IRC Section 351. B recognizes a gain of $10,000, which is the lesser of the realized gain ($10,000) or the boot received ($20,000).

A Transfers Machines Valued at $170,000 (Basis = $150,000)along with $30,000