A shareholder's basis in stock received in a Sec. 351 transaction is
A)increased by the gain recognized by the corporation.
B)decreased by the gain recognized by the transferor.
C)decreased by liabilities assumed by the corporation.
D)increased by the FMV of boot received from the corporation.

Question

Quizplus · Accepted Answer

A shareholder's basis in stock received in a Sec. 351 transaction is generally equal to the sum of (1) the basis in the property transferred to the corporation, and (2) any gain recognized by the shareholder on the transfer. However, the shareholder's basis must be decreased by any liabilities assumed by the corporation. The gain recognized by the corporation or any FMV boot received does not affect the shareholder's basis in the stock.

A Shareholder's Basis in Stock Received in a Sec