Rick transferred the following assets and liabilities to Warbler Corporation. $\begin{array}{lll}&&\text { Fair Market }\
& \text { Adjusted Basis } & \text { Value }\
\text { Building } & \$ 210,000 & \$ 225,000 \
\text { Equipment } & 45,000 & 75,000 \
\text { Trucks } & 15,000 & 30,000 \
\text { Mortgage (held for four years) on building } & 30,000 & 30,000
\end{array}$ In return, Rick received $75,000 in cash plus 90% of Warbler Corporation's only class of stock outstanding fair market value of $225,000).

Question

Quizplus · Accepted Answer

Rick's recognized gain is calculated as the lesser of the realized gain or the boot received. The realized gain is the difference between the fair market value of the assets transferred ($330,000) and the adjusted basis ($270,000), which is $60,000. The boot received is $75,000. Therefore, the recognized gain is $60,000.

Rick Transferred the Following Assets and Liabilities to Warbler Corporation