Antoine transfers property with a tax basis of $500 and a fair market value of $600 to a corporation in exchange for stock with a fair market value of $550 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $50 on the property transferred. What is Antoine's tax basis in the stock received in the exchange?
A)$600
B)$550
C)$500
D)$450

Question

Quizplus · Accepted Answer

Antoine's tax basis in the stock received is equal to the tax basis of the property transferred reduced by the amount of the liability assumed by the corporation. Therefore, Antoine's tax basis in the stock is $500 (tax basis of the property transferred) minus $50 (liability assumed by the corporation) which equals $450.

Antoine Transfers Property with a Tax Basis of $500 and a Fair