Question

Ashley transfers property with a tax basis of $8,180 and a fair market value of $4,660 to a corporation in exchange for stock with a fair market value of $3,520 and $445 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $695 on the property transferred. What is Ashley's tax basis in the stock received in the exchange

Answer 1

$3,720

Step-by-step explanation:

Since the shareholder's tax basis will be to his tax basis in the property transferred of the amount of $8,180 which is a substituted basis minus the amount of $695 which is the liability assumed by the corporation then less the fair market value of boot received.

Therefore if Ashely decide to sells the stock for $3,520, the loss she will recognized will be $3,720($8,180-$4,460) which is an amount equal to the loss deferred of $3,720

Hence ,Ashley's tax basis in the stock received in the exchange will be $3,720