Cherie transfers two assets to a newly-created corporation. The first asset has an adjusted basis of $40,000 and an FMV of $50,000. The second asset has an adjusted basis of $35,000 and an FMV of $25,000. Cherie receives stock with an FMV of $66,000 and $9,000 cash. Cherie must recognize a gain of

Question

Quizplus · Accepted Answer

Cherie must recognize a gain to the extent of the "boot" received, which is the $9,000 cash. The gain realized is the difference between the FMV of the assets transferred ($75,000) and their adjusted basis ($75,000), but the gain recognized is limited to the lesser of the gain realized or the boot received, which is $9,000.

Cherie Transfers Two Assets to a Newly-Created Corporation