Question

Ben and John formed BCD Inc., a corporation, in 2013. Ben received 80% of the voting common stock, the only class of stock and John received the remaining 20% of the stock. In 2014, Ben transferred additional property to BCD Inc. The property had an adjusted basis to Ben of $40,000 and a fair market value of $50,000 on the date of the transfer. On the same day, and in exchange for the property he transferred to BCD Inc., Ben received cash of $15,000 and additional stock worth $35,000. How much gain was recognized by Ben as a result of this transaction

Answer 1

Gain recognized by Ben = $10,000

Step-by-step explanation:

Given Data:

Adjusted basis of property=$40000

Cash received = $15000

Additional stock received = $35000

Total received = Cash received + Additional stock received

= $35000 + $15000

= $50000

Gain recognized by Ben = Total received - Adjusted basis of property

=$50,000 -$40,000

= $10,000

Therefore, gain recognized by Ben = $10,000