Question

Mr. Brown transferred property, which had an adjusted basis to him of $40,000 and a fair market value of $50,000, to Corporation B in exchange for 100% of B’s only class of stock and $15,000 cash. At the time of the transfer, the stock had a fair market value of $35,000. What is the amount of gain to be recognized by Mr. Brown?

Answer 1

$0

Step-by-step explanation:

The adjusted basis for any property or assets transferred to a corporation or a partnership in exchange for shares or property rights must be registered at fair market value.

In this case Mr. Brown transferred property with a fair market value of $50,000 and received in exchange stock worth $35,000 and $15,000 in cash. ($50,000 = $35,000 + $15,000)