Individuals Bert and Tariq form Shark Corporation. Bert transfers equipment with a $290,000 adjusted basis and a $335,000 FMV for 50% of the stock worth $310,000 and a note of Shark Corporation valued at $25,000. Tariq transfers cash of $335,000 in exchange for 50% of the stock of Shark Corporation worth $310,000 and a $25,000 note. Bert's recognized gain is

Question

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Bert's recognized gain is the lesser of the realized gain or the boot received. The realized gain is $45,000 ($335,000 FMV - $290,000 adjusted basis). The boot received is $25,000 (the note). Therefore, the recognized gain is $25,000.

Individuals Bert and Tariq Form Shark Corporation