Question

Allen transfers marketable securities with an adjusted basis of $120,000, fair market value of $300,000, for 85% of the stock of Heron Corporation. In addition, he receives cash of $40,000. Allen recognizes a capital gain of $40,000 on the transfer.tRUE/FALSE

Answer 1

True

Step-by-step explanation:

The reason is that it is transfering marketable securities for another marketables securities which are subject to a change of values as the previous one. Only the amount received in cash was realized thus, that is the amount of gain Allen will recognize as capital gain

The other part is unrealized gain until this shares are sold point atwhich, Allen which check for how much is the realized gain/loss in the transaction