Question

Jack transferred a building that had an adjusted basis of $75,000 and a fair market value of $130,000 to R Corp. in exchange for 80% of R's only class of stock and a car with an adjusted basis to R of $25,000. The FMV of the stock at the time of the transfer was $100,000 and the car's FMV was $30,000. How much gain must R recognize on the exchange?

A. $30,000
B. $5,000
C. $100,000
D. $105,000

Answer 1

A. $30,000

Step-by-step explanation:

Jack realises gain of ( 100000 FMV of stock + 30000 FMV of car - 75000 Adjusted basis )

$ 55000

Jack recognises gain of $ 30000 i.e the FMV of the property ( car ) other than the stock received.

Therefore, The amount of gain that R must recognize on the exchange is $30,000.