Jeremy transfers Sec. 351 property acquired three years earlier having a $100,000 basis and a $160,000 FMV to Jeneva Corporation. Jeremy receives all 200 shares of Jeneva stock having a $140,000 FMV, and a $20,000 90-day Jeneva note. What is Jeremy's recognized gain?
A)$0
B)$60,000
C)$20,000
D)$160,000

Question

Quizplus · Accepted Answer

According to Section 351, no gain or loss is recognized on the transfer of property to a corporation in exchange for stock and/or securities. However, this rule does not apply if the transferor also receives cash or other property, which in this case is the $20,000 Jeneva note. Therefore, Jeremy's recognized gain is equal to the FMV of the note, which is $20,000.

Jeremy Transfers Sec