Tristan transfers property with a tax basis of $1,015 and a fair market value of $1,520 to a corporation in exchange for stock with a fair market value of $1,015 and $378 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $127 on the property transferred. What is the corporation's tax basis in the property received in the exchange?
A)$1,520
B)$1,393
C)$1,142
D)$1,015

Question

Quizplus · Accepted Answer

In a section 351 exchange, the corporation's tax basis in the property received is equal to the transferor's tax basis plus any liabilities assumed by the corporation. Therefore, the corporation's tax basis in the property received in this exchange is $1,015 (Tristan's tax basis) + $127 (liability assumed by the corporation) = $1,142.

Tristan Transfers Property with a Tax Basis of $1,015 and a Fair