Question

Andrew contributes a building with a value of $650,000 (his basis is $400,000) to a corporation in a tax-deferred Section 351 transaction. The corporation assumes a $370,000 mortgage as part of the transfer. What is Andrew's basis in the stock he receives from the corporation

Answer 1

$30,000

Step-by-step explanation:

Data provided in the question

Contributed value of building = $650,000

Andrew basis of building = $400,000

Mortgage amount as a part of the transfer = $370,000

So according to the section 351, the amount of Andrew basis received from the corporation is

= Andrew basis of building - Mortgage amount as a part of the transfer

= $400,000 - $370,000

= $30,000