Question

Carlos transfers property with a tax basis of $500 and a fair market value of $800 to a corporation in exchange for stock with a fair market value of $650 and $50 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $100 on the property transferred. What is the corporation's tax basis in the property received in the exchange?a. $800 b. $600 c. $550 d. $450

Answer 1

c. $550

Step-by-step explanation:

Property has transfered by Carlos, and at the time of Transfer Carlos basis on the Property is $500.

So, from "Carryover basis" rule:

Corporation Tax basis on Property is = Basis of Carlos + Gain recognised.

= $500 + $50

= $550.

Therefore, The corporation's tax basis in the property received in the exchange is $550