Ashley transfers property with a tax basis of $7,430 and a fair market value of $4,985 to a corporation in exchange for stock with a fair market value of $2,445 and $1,130 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $1,410 on the property transferred. What is Ashley's tax basis in the stock received in the exchange?
A)$7,430
B)$4,890
C)$4,985
D)$2,445

Question

Quizplus · Accepted Answer

Ashley's tax basis in the stock received is calculated by starting with her original basis in the property transferred ($7,430), then subtracting the cash received ($1,130), and also subtracting the liability assumed by the corporation ($1,410). This results in a new basis of $4,890 ($7,430 - $1,130 - $1,410 = $4,890).

Ashley Transfers Property with a Tax Basis of $7,430 and a Fair