Question

Jerry transfers property with a $28,000 adjusted basis and a $50,000 FMV to Texas Corporation for 75 shares of Texas stock. Frank, Jerry’s father, transfers property with a $32,000 adjusted basis and a $50,000 FMV to Texas for the remaining 25 shares of Texas stock. a. What is the amount of each transferor’s recognized gain or loss? b. What is Jerry’s basis in his Texas stock? c. What is Frank’s basis in his Texas stock? Rupert, Timothy J.. Pearson's Federal Taxation 2020 Corporations, Partnerships, Estates & Trusts (p. 2-40). Pearson Education. Kindle Edition.

Answer 1

a. None b. $44, 000 c. $16,000

Step-by-step explanation:

a. Jerry and Frank didn't have any loss or gain because none of them met the basic requirements (as outlined in the Sec. 351).

b. Due to the dis-proportionality of the exchange, Jerry’s basis in the Texas stock will be the addition of his 75 shares and 25 shares. Therefore, $28,000 + $16,000 = $44, 000.

c. Frank’s basis is calculated as $32,000 x 25/50 = 0.5* $32,000 = $16,000.