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Albert transfers land (basis of $140,000 and fair market value of $320,000) to Gold Corporation for...

Albert transfers land (basis of $140,000 and fair market value of $320,000) to Gold Corporation for 80% of its stock and a note payable in the amount of $80,000. Gold assumes Albert’s mortgage on the land of $190,000.

Identify all the tax consequences in this transaction to both Albert and Gold, identify relevant code sections as appropriate .

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Answer #1

Answer -

It is recognised as gain under section 357(c).

And the tax consequences for Albert and Gold will be as per below explanation-

The mortgage on land exceeds Albert basis in the land by $50000 (190000 - $140000). Gold corporation note payable of $80000 is treated as boot. So, Albert recognised gain is $130000. Gold corporation basis in land is $270000 {$140000 (Albert basis) + $130000 (recognised gain)}.

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