Question

Celeste transferred 100 percent of her stock in Supply Chain Company to Marketing Corporation in a Type A merger. In exchange, she received stock in Marketing with a fair market value of $562,000 + $562,000 in cash. Celeste's tax basis in the Supply Chain stock was $1,320,000. What amount of loss does Celeste recognize in the exchange and what is her basis in the Marketing stock she receives?

Answer 1

Answer: $196000

Step-by-step explanation:

Firstly, we have to calculate the stock basis which will be the difference between the carryover Basis and the cash received. This will be:

= $1,320,000 - $562,000

= $758,000

If the sticks are being sold at $562,000, this will bring about a loss of:

= $758,000 - $562,000

= $196000