Jacob and Ashley form Junco Corporation with the following investments: From Jacob From Ashley
Cash $200,000
Equipment (basis of $400,000;fair market value of $300,000)300,000
Land (basis of $300,000;fair market value of $600,000
$600,000)
Jacob and Ashley each receive one-half of the Junco stock.In addition,Ashley receives cash of $100,000.One of the results of these transfers is:

Question

Quizplus · Accepted Answer

Because § 351 applies,Jacob has no recognized loss (choice a. ).Ashley's recognized gain is limited to the lesser of her realized gain of $300,000 or the boot received of $100,000 (choice b. ).Junco's basis in the land is Ashley's basis of $300,000 plus her recognized gain of $100,000,or $400,000 (choice c. ).Ashley's basis in the Junco stock is $300,000 [$300,000 (basis in the land)- $100,000 (boot received)+ $100,000 (gain recognized)]-choice d.

Jacob and Ashley Form Junco Corporation with the Following Investments