Axle Corporation acquires 100% of Drexel Corporation's stock from Drexel's shareholders for $500,000 cash. Drexel Corporation has assets with a $600,000 adjusted basis and an $800,000 FMV. The assets are subject to $200,000 in liabilities. Drexel Corporation shareholders purchased their stock eight years ago for $300,000. Axle Corporation's basis in the Drexel Corporation stock is

Question

Quizplus · Accepted Answer

Axle Corporation's basis in the Drexel Corporation stock will be the amount paid for the stock ($500,000). The adjusted basis and FMV of Drexel Corporation's assets, as well as the shareholders' purchase price of the stock, are not relevant to Axle Corporation's basis in the stock.

Axle Corporation Acquires 100% of Drexel Corporation's Stock from Drexel's