Question

Carlos transfers property with a tax basis of $820 and a fair market value of $1,145 to a corporation in exchange for stock with a fair market value of $995 and $69 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $81 on the property transferred. What is the corporation's tax basis in the property received in the exchange

Answer 1

The corporation's tax basis in the property received in the exchange is $889

Step-by-step explanation:

Property was transferred by Carlos, and at the time of Transfer Carlos basis on the Property is $820.

From "Carryover basis" rule,

Corporation Tax basis on Property = (Basis of Carlos) + (Gain recognized)

So, Corporation's tax basis in the Property

= $820 + $69

= $889