Wally contributes land (adjusted basis of $30,000; fair market value of $100,000) to an S corporation in a transaction which qualifies under § 351. The corporation subsequently sells the land for $120,000, recognizing a gain of $90,000 ($120,000 - $30,000). If Wally owns 30% of the stock, $76,000 [$70,000 + 30%($20,000)] of the $90,000 recognized gain is allocated to Wally.

Question

Quizplus · Accepted Answer

The gain recognized by the corporation is $90,000, and Wally's share of the gain is 30% of $90,000, which is $27,000, not $76,000.

Wally Contributes Land (Adjusted Basis of $30,000; Fair Market Value