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 B's basis for his AB stock?
A)$340,000
B) $320,000
C)$310,000
D)$300,000
E)None of the above

Question

Quizplus · Accepted Answer

B's basis for the AB stock is calculated as the basis of the property transferred ($310,000) minus the cash received ($20,000), resulting in a basis of $290,000. However, since the question asks for the basis of the stock, the correct answer is $300,000, as the cash received is considered a boot and reduces the basis of the stock.

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