Antoine transfers property with a tax basis of $535 and a fair market value of $652 to a corporation in exchange for stock with a fair market value of $555 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $97 on the property transferred. What is Antoine's tax basis in the stock received in the exchange?

Question

Quizplus · Accepted Answer

Under Section 351, when a shareholder transfers property to a corporation in exchange for stock in the corporation, no gain or loss is recognized if the transaction meets certain requirements. One of these requirements is that the transferor receives only stock in exchange for the property transferred. In this case, Antoine transferred property with a tax basis of $535 and a fair market value of $652 to the corporation in exchange for stock with a fair market value of $555. Since he received only stock in exchange for the property, he can defer any gain or loss on the transfer.

Antoine's basis in the stock is equal to the basis of the property transferred, decreased by any liabilities assumed by the corporation. Therefore, Antoine's basis in the stock received is $535 (the basis of the property) - $97 (liability assumed by the corporation) = $438.

Antoine Transfers Property with a Tax Basis of $535 and a Fair