Maria defers $100 of gain realized in a §351 transaction. The stock she receives in the exchange has a fair market value of $500. Maria's tax basis in the stock will be $400.

Question

Quizplus · Accepted Answer

When deferring gain in a §351 transaction, the tax basis of the stock received is equal to the tax basis of the property transferred, minus the amount of deferred gain ($100 in this case). Therefore, Maria's tax basis in the stock will be $400 ($500 - $100).

Maria Defers $100 of Gain Realized in a §351 Transaction