This year J and K formed New Corporation.J transferred the assets below to New in exchange for stock. $\begin{array} { l }&\text { Adjusted Basis }&\text { Fair Market Value }\
\text { Building }&\$45,000&\$90,000\
\text { Equipment }&100,000&110,000\
\text { Total }&\$145,000&\$200,000
\end{array}$
In addition the building was subject to a mortgage of $50,000.J received stock worth $150,000 on the exchange.Assume that the transfer meets the requirements of § 351.J will recognize

Question

This year J and K formed New Corporation.J transferred the assets below to New in exchange for stock. $\begin{array} { l  }&\text { Adjusted Basis }&\text { Fair Market Value }\
\text { Building }&\$45,000&\$90,000\
\text { Equipment }&100,000&110,000\
\text { Total }&\$145,000&\$200,000
\end{array}$
 In addition the building was subject to a mortgage of $50,000.J received stock worth $150,000 on the exchange.Assume that the transfer meets the requirements of § 351.J will recognize

Quizplus · Accepted Answer

Under § 351 of the Internal Revenue Code, no gain or loss is recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation, and immediately after the exchange, such person(s) are in control (meaning they own at least 80% of the stock) of the corporation. In this scenario, J transferred assets to New Corporation in exchange for stock, and assuming the transaction meets the requirements of § 351, J would recognize no gain or loss on the exchange.

This Year J and K Formed New Corporation In Addition the Building Was Subject to a Mortgage of Assets