Final answer:
Rebecca's basis in the NewCo stock she received would be $300,000, calculated by subtracting the cash received ($100,000) from her original basis in the property ($400,000). She must recognize a gain equal to the amount of cash received but doesn't necessarily recognize the entire gain from the exchange of her property for stock due to the non-recognition provision of IRC § 351.
Step-by-step explanation:
If Rebecca was one of a group of shareholders who contributed qualifying property to a newly formed C corporation, NewCo, and the group received back 100% of the vote and value of the stock of NewCo, and she also received $100,000 in cash, the tax basis of the stock Rebecca received would be calculated as follows:
Rebecca's original basis in the property was $400,000. Since she received $100,000 in cash, this amount is considered boot, and it reduces her basis in the stock of NewCo. Her basis in the NewCo stock is therefore her original basis in the property she contributed ($400,000) minus the cash received ($100,000). Thus, the basis in her NewCo stock would be $300,000.
It is important to note that Rebecca must also recognize a gain to the extent of cash received ($100,000), because the fair market value (FMV) of the stock she receives is less than the FMV of the property she gave up. However, her realized gain of $300,000 (FMV of property $700,000 minus her original tax basis of $400,000) does not exceed her recognized gain of $100,000. This is so because under IRC § 351, if certain requirements are met, the exchange is generally non-recognition of gain or loss.