Brad forms Vott Corporation by contributing equipment, which has a basis of $50,000 and an FMV of $40,000 in exchange for Vott stock. Brad also contributes $5,000 in cash. If the transaction meets the Sec. 351 control and ownership tests, what are the tax consequences to Brad?
A)He recognizes a $5,000 loss.
B)He recognizes a $5,000 gain and a $10,000 loss.
C)He recognizes neither a gain nor a loss.
D)He recognizes a $10,000 loss.

Question

Quizplus · Accepted Answer

Since the transaction meets the Sec. 351 control and ownership tests, there are no tax consequences to Brad. He does not recognize a gain or loss on the contribution of equipment and cash in exchange for Vott stock.

Brad Forms Vott Corporation by Contributing Equipment, Which Has a Basis