Inez transfers property with a tax basis of $200 and a fair market value of $300 to a corporation in exchange for stock with a fair market value of $250 in a transaction that qualifies for deferral under §351. The corporation assumed a liability of $50 on the property transferred. What is the corporation's tax basis in the property received in the exchange?
A)$150
B)$200
C)$250
D)$300

Question

Quizplus · Accepted Answer

When property is transferred to a corporation in exchange for stock in a transaction that qualifies for deferral under §351, the corporation's tax basis in the property received is the same as the transferor's tax basis (§358(a)(1)). In this case, Inez's tax basis is $200, so the corporation's tax basis in the property received is also $200. The liability assumed by the corporation does not affect the tax basis of the property received. Therefore, the correct answer is B) $200.

Inez Transfers Property with a Tax Basis of $200 and a Fair