Ann,Irene,and Bob incorporate their respective businesses and form Dove Corporation.Ann exchanges her property (basis of $100,000 and fair market value of $400,000)for 200 shares in Dove Corporation on March 3,2008.Irene exchanges her property (basis of $140,000 and fair market value of $600,000)for 300 shares in Dove Corporation on April 10,2008.Bob transfers his property (basis of $250,000 and fair market value of $1,000,000)for 500 shares in Dove Corporation on May 17,2010.Bob's transfer is not part of a prearranged plan with Ann and Irene to incorporate their businesses.What gain,if any,will Bob recognize on the transfer?

Question

Quizplus · Accepted Answer

Bob will recognize a gain of $750,000 because his transfer does not qualify for non-recognition under IRC Section 351, as it was not part of a prearranged plan with Ann and Irene. Therefore, the gain is calculated as the fair market value of the property transferred ($1,000,000) minus the basis ($250,000).

Ann,Irene,and Bob Incorporate Their Respective Businesses and Form Dove Corporation