Rachelle transfers property with a tax basis of $800 and a fair market value of $900 to a corporation in exchange for stock with a fair market value of $750 and $50 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $100 on the property transferred. What is the corporation's tax basis in the property received in the exchange?

Question

Quizplus · Accepted Answer

The corporation's tax basis in the property received equals the sum of the fair market value of the stock ($750) and the amount of the liability assumed ($100), which equals $850. This is lower than the fair market value of the property transferred, but is the correct tax basis for the corporation.

Rachelle Transfers Property with a Tax Basis of $800 and a Fair