Bob exchanges 4,000 shares of Beetle Corporation stock that he had purchased for $800,000 for 6,000 shares of Butterfly Corporation common stock with a fair market value of $1,000,000.What is Bob's recognized gain on the exchange and his basis in the Butterfly stock?

Question

Quizplus · Accepted Answer

Bob's recognized gain on the exchange is the difference between the fair market value of the Butterfly Corporation stock he received ($1,000,000) and the adjusted basis of the Beetle Corporation stock he exchanged ($800,000), which is $200,000.
His basis in the Butterfly Corporation stock is the same as his adjusted basis in the Beetle Corporation stock ($800,000).

Bob Exchanges 4,000 Shares of Beetle Corporation Stock That He