Question

Sybil transfers property with a tax basis of $5,000 and a fair market value of $6,000 to a corporation in exchange for stock with a fair market value of $3,000 and $2,000 cash in a transaction that qualifies as a section 351 transfer. The corporation assumed a liability of $1,000 on the property transferred. What is Sybil's tax basis in the stock received in the exchange?

A) $6,000.
B) $5,000.
C) $4,000.
D) $3,000.

Answer 1

D) $3,000

Step-by-step explanation:

Calculation to calculate determine Sybil's tax basis in the stock received in the exchange

Tax basis $5,000

Add recognized gain $1,000

($6,000-$5,000)

Less boot received ($2,000)

Less liability ($1,000)

Sybil's tax basis $3,000

Therefore Sybil's tax basis in the stock received in the exchange will be $3,000