Carolyn transfers property with an adjusted basis of $50,000 and an FMV of $60,000 in exchange for Prime Corporation stock in a Sec. 351 transaction. Carolyn's basis in the stock is
A)$60,000.
B)$50,000.
C)$10,000.
D)$0.

Question

Quizplus · Accepted Answer

In a Sec. 351 transaction, the transfer of property to a corporation in exchange for stock is not a taxable transaction for both the transferor and the corporation. The transferor's basis in the stock received is the same as the basis in the property transferred. Therefore, Carolyn's basis in the Prime Corporation stock is $50,000 (the adjusted basis of the property she transferred).

Carolyn Transfers Property with an Adjusted Basis of $50,000 and an FMV