Amy transfers property with a tax basis of $900 and a fair market value of $600 to a corporation in exchange for stock with a fair market value of $450 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $150 on the property transferred. What is Amy's tax basis in the stock received in the exchange?

Question

Quizplus · Accepted Answer

Under section 351, when property is transferred to a corporation in exchange for stock, no gain or loss is recognized by the transferor. The tax basis of the stock received in the exchange is equal to the tax basis of the property transferred, increased by any gain recognized and decreased by any liabilities assumed by the corporation.

In this case, Amy transferred property with a tax basis of $900 and a fair market value of $600 to the corporation in exchange for stock with a fair market value of $450. The corporation assumed a liability of $150 on the property transferred. Therefore, Amy's tax basis in the stock received is $900 - $150 = $750.

Amy Transfers Property with a Tax Basis of $900 and a Fair