Question

Celeste transferred 100 percent of her stock in Supply Chain Company to Marketing Corporation in a Type A merger. In exchange, she received stock in Marketing with a fair market value of $715,000 plus $715,000 in cash. Celeste's tax basis in the Supply Chain stock was $1,580,000. What amount of loss does Celeste recognize in the exchange and what is her basis in the Marketing stock she receives

Answer 1

Answer and Explanation:

In the case when there is a tax deferred exchange so no loss would be recorded

The Stock basis is

= Carryover Basis - Cash received

= $1,580,000 - $715,000

= $865,000

In the case when it sold for $715,000 so she received a loss of

= $865,000 - $715,000

= $150,000