Question

The tax basis of stock received in a tax-deferred §351 transaction is typically the same basis as the property transferred which is referred to as a(n)

a. substituted basis.
b. carryover basis.
c. adjusted basis.
d. stepped-up basis.

Answer 1

The tax basis of the stock received in a tax-deferred §351 transaction is referred to as a carryover basis, which means it retains the same basis as the property transferred, adjusted for any recognized gain or loss.

Step-by-step explanation:

The tax basis of the stock received in a tax-deferred §351 transaction is typically the same as the basis of the property transferred. This is referred to as a carryover basis. In a §351 transaction, when a taxpayer transfers property to a corporation in exchange for stock, and certain conditions are met, the transaction is processed with no immediate gain or loss recognized. This allows the tax basis of the transferred property to carry over to the stock received, meaning that the taxpayer retains the original basis of the property, adjusted for any gain or loss recognized during the transaction.