148k views
4 votes
Tracy transfers property with a value of $60,000 and adjusted basis of $50,000 to form Riley Corp. solely in exchange for all 100 shares of Riley stock valued $60,000. What is Riley Corp.'s basis in the property

User Kuzdu
by
7.9k points

1 Answer

4 votes

Answer:

$60,000

Step-by-step explanation:

Tracy's basis on the transfer is $50,000 and the amount realized is $60,000.

So Tracy should have a realized gain of $10,000, but Section 351 states that no gain or loss must be recognized when one person transfers property in exchange for a corporation's stock if immediately after the transfer, the person controls the corporation. In this case, Tracy will own 100% of Riley Corp., so she doesn't have to recognize any gain.

Riley Corp.'s basis on the property will be $60,000 which is equal to the fair market value and the value realized by Tracy.

User Cerin
by
9.0k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.