Eileen transfers property worth $200,000 (basis of $190,000) to Goldfinch Corporation. In return, she receives 80% of the stock in Goldfinch Corporation (fair market value of $180,000) and a long-term note (fair market value of $20,000) executed by Goldfinch and made payable to Eileen. Eileen recognizes gain on the transfer of:
A) $0.
B) $10,000.
C) $20,000.
D) $190,000.
E) None of the above.

Question

Quizplus · Accepted Answer

Eileen recognizes a gain of $10,000, which is the lesser of the realized gain ($200,000 - $190,000 = $10,000) or the fair market value of the boot received ($20,000 note).

Eileen Transfers Property Worth $200,000 (Basis of $190,000) to Goldfinch