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

Bob's gain recognized is the lesser of the liabilities assumed by the corporation ($70,000) or the realized gain ($40,000, which is FMV of $100,000 minus basis of $60,000). Therefore, the recognized gain is $10,000.

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