Question

Antoine transfers property with a tax basis of $500 and a fair market value of $600 to a corporation in exchange for stock with a fair market value of $550 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $50 on the property transferred. What is Antoine's tax basis in the stock received in the exchange?

Answer 1

Antoine's tax basis in the stock received in the exchange is $450

Step-by-step explanation:

Antoine's tax basis in the stock received in the exchange will be

Tax basis = Tax basis - Liability

= 500 - 50

= $450

Tax basis will be adjusted basis of asset exchanged and decreased by liability assumed by trans-free.