Bob transfers assets with a $100,000 FMV (basis $60,000)and $70,000 of business-related liabilities to a corporation in exchange for 100% of the corporation's stock with a FMV of $30,000.The corporation assumes the $70,000 mortgage.The transfer qualifies under Sec.351.What is Bob's gain recognized on the transfer?

Question

Quizplus · Accepted Answer

Under Sec. 351, no gain or loss is recognized if property is transferred to a corporation solely in exchange for stock and the transferor is in control of the corporation immediately after the exchange. However, if liabilities assumed by the corporation exceed the basis of the assets transferred, the excess is recognized as gain. Here, liabilities ($70,000) exceed the basis ($60,000) by $10,000, so Bob recognizes a $10,000 gain.

Bob Transfers Assets with a $100,000 FMV (Basis $60,000)and $70,000