Casey transfers property with a tax basis of $2,000 and a fair market value of $5,000 to a corporation in exchange for stock with a fair market value of $4,000 and $400 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $600 on the property transferred. Casey also incurred selling expenses of $300. What is the amount realized by Casey in the exchange?

Question

Quizplus · Accepted Answer

The amount realized by Casey is the sum of the fair market value of the stock received ($4,000), the cash received ($400), and the amount of the liability assumed by the corporation ($600). This equals $5,000. However, Casey must reduce the amount realized by the selling expenses incurred ($300). Therefore, the amount realized by Casey is $4,700.

Casey Transfers Property with a Tax Basis of $2,000 and a Fair