Rachelle transfers property with a tax basis of $800 and a fair market value of $900 to a corporation in exchange for stock with a fair market value of $750 and $50 cash in a transaction that qualifies for deferral under section 351.The corporation assumed a liability of $100 on the property transferred.What is the corporation's tax basis in the property received in the exchange?
A)$900.
B)$850.
C)$800.
D)$750.

Question

Quizplus · Accepted Answer

The corporation's tax basis in the property is the transferor's basis ($800) plus any gain recognized by the transferor. Rachelle recognizes a gain of $50 (cash received) - $50 (liability assumed) = $0. Therefore, the corporation's basis is $800 + $50 = $850.

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