Tara transfers land with a $600,000 adjusted basis and a $700,000 FMV to a corporation in a Sec. 351 transfer. Immediately after the transfer, Tara owns 100% of the corporation- stock with a FMV of $660,000. In addition, Tara's $40,000 principal balance on her student loan is legally assumed by the corporation as part of the overall transfer. No other property is transferred. Tara's recognized gain on the transfer is

Question

Quizplus · Accepted Answer

The recognized gain is the lesser of the boot received ($40,000 student loan assumption) or the realized gain ($100,000, which is the FMV of the stock plus the loan assumption minus the adjusted basis). Thus, Tara recognizes a $40,000 gain.

Tara Transfers Land with a $600,000 Adjusted Basis and a $700,000