Homework Answers
As per Section 351 any loss will not be realized but if any boot is received along with the qualified stock then the stock and boot will be allocated on pro-rata basis on the basis of the different types of property transferred. Loss on one asset will not be allowed to set off from the gain of another.
| Basis | FMV |
Share and boot (pro-rata) |
Gain/(loss) | |
| Asset 1 | 40,000 | 30,000 | 39,024 | 9,024 |
| Asset 2 | 15,000 | 40,000 | 14,634 | (25,366) |
| Asset 3 | 27,000 | 10,000 | 26,341 | 16,341 |
Total stock and boot: 80,000 (20,000+60,000)
Total of basis: 82,000
Divide on pro rata basis:
Asset 1: 80,000*40,000/82,000= 39,024
Asset 2: 80,000*15,000/82000= 14,634
Asset 3: 80,000*27,000/82,000= 26,341
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