Question

Gabrielle transfers property with a tax basis of $400 and a fair market value of $700 to a corporation in exchange for stock with a fair market value of $500 and $100 of cash in a transaction that qualifies for deferral under section 351. The corporation also assumed a liability of $100 on the property transferred. What is Gabrielle's tax basis in the stock received in the exchange

Answer 1

the tax basis in the stock received in the case of exchange is $300

Step-by-step explanation:

The computation of the tax basis in the stock received in the case of exchange is as follows:

Gabrielle’s tax basis in the stock is

= Tax basis of property transferred + Gain recognized - Cash received - Liabilities assumed

= $400 + $100 - $100 - $100

= $300

Hence, the tax basis in the stock received in the case of exchange is $300