Question

Amy transfers property with a tax basis of $970 and a fair market value of $650 to a corporation in exchange for stock with a fair market value of $455 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $195 on the property transferred. What is Amy's tax basis in the stock received in the exchange?

Answer 1

$775

Step-by-step explanation:

Calculation for Amy's tax basis in the stock received in the exchange

Using this formula

Tax basis in the Stock received Exchange = Tax basis - Liability on property transferred

Let plug in the formula

Tax basis in the Stock received Exchange=$970-$195

Tax basis in the Stock received Exchange = $775

Therefore Amy's TAX BASIS in the stock received in the exchange will be $775