Question

Casey transfers property with a tax basis of $2,000 and a fair market value of $5,000 to a corporation in exchange for stock with a fair market value of $4,000 and $400 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $600 on the property transferred. Casey also incurred selling expenses of $300. What is the amount realized by Casey in the exchange?

A. $5,000
B. $4, 700
C.. $4, 600
D. $4, 200

Answer 1

B. $4,700

Step-by-step explanation:

Calculation for the amount realized by Casey in the exchange

Using this formula

Amount realized in the exchange=Fair market value+ Qualifies deferral transaction+Property transferred Liability-Incurred selling expenses

Let plug in the formula

Amount realized in the exchange=$4,000 +$400 +$600 - $300

Amount realized in the exchange=$4,700

Therefore the amount realized by Casey in the exchange will be $4,700