A taxpayer transfers assets and liabilities to a corporation in return for its stock. If the liabilities exceed the basis of the assets transferred, the taxpayer will have a negative basis in the stock.

Question

Quizplus · Accepted Answer

When a taxpayer transfers assets and liabilities to a corporation in return for its stock, if the liabilities exceed the assets' basis, it does not result in a negative basis in the stock. Instead, the excess liabilities over the basis of the assets transferred are treated as gain to the taxpayer.

A Taxpayer Transfers Assets and Liabilities to a Corporation in Return