Maria defers $100 of gain realized in a section 351 transaction.The stock she receives in the exchange has a fair market value of $500.Maria's tax basis in the stock will be $400.

Question

Quizplus · Accepted Answer

When a taxpayer defers gain in a Section 351 transaction, the tax basis of the stock received is equal to the tax basis of the property contributed plus any recognized gain. Since Maria deferred $100 of gain and the stock received had a fair market value of $500, her tax basis in the stock would be $400 ($500 FMV - $100 deferred gain).

Maria Defers $100 of Gain Realized in a Section 351