Mario and Lupita form a corporation in a transaction coming under Sec. 351. Lupita transfers property with an adjusted basis of $150,000 and an FMV of $200,000 in exchange for one- half of the stock. The property has an $80,000 mortgage, which the corporation assumes. Lupita has a recognized gain of

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Since the transaction is a Sec. 351 exchange, Lupita's transfer of property will not result in any recognized gain or loss. The adjusted basis of the property is less than the FMV of the stock received, but because the corporation assumes the mortgage, Lupita is considered to have received boot (the loan relief). However, the amount of boot received is less than the realized gain on the transfer, so there is no recognized gain.

Mario and Lupita Form a Corporation in a Transaction Coming