Amy transfers property with a tax basis of $1,590 and a fair market value of $1,080 to a corporation in exchange for stock with a fair market value of $605 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $475 on the property transferred. What is Amy's tax basis in the stock received in the exchange?

Question

Quizplus · Accepted Answer

In a section 351 exchange, the transferor's tax basis in the stock received is equal to the tax basis of the property transferred, reduced by any liabilities assumed by the corporation. Therefore, Amy's tax basis in the stock received would be:

$1,590 (tax basis of property) - $475 (liability assumed by corporation) = $1,115

This means that choice B is the correct answer.

Amy Transfers Property with a Tax Basis of $1,590 and a Fair