Eileen transfers property worth $200,000 (basis of $60,000)to Goldfinch Corporation.In return,she receives 80% of the stock in Goldfinch Corporation (fair market value of $180,000)and a long-term note (fair market value of $20,000)executed by Goldfinch and made payable to Eileen.Eileen recognizes gain on the transfer of:

Question

Quizplus · Accepted Answer

Eileen recognizes a gain of $20,000, which is the fair market value of the long-term note received. Under IRC Section 351, no gain or loss is recognized if property is transferred to a corporation solely in exchange for stock and the transferor is in control of the corporation immediately after the exchange. However, if other property (boot) is received, such as the note, gain is recognized to the extent of the boot received.

Eileen Transfers Property Worth $200,000 (Basis of $60,000)to Goldfinch Corporation