Question

1. Jocelyn contributes land with a basis of $32,000 and fair market value of $48,000 and inventory with a basis of $14,200 and fair market value of $21,300 in exchange for 100% of Zion Corporation stock. The land is subject to a $8,000 mortgage.

   Determine Jocelyn's recognized gain or loss and the basis in the Zion stock received.

   If an amount is zero, enter "0".

   The exchange_____ tax-free under § 351 because the release of a liability______ treated as boot under

2. § 357(a). As a result, Jocelyn has income of $_____ and a basis $______ in her stock.

Answer 1

The exchange is tax-free under § 351 because the release of a liability is not treated as boot under § 357(a). As a result, Jocelyn has income of $ 0 and a basis $38,200 in her stock.

Working

Jocelyn’s basis in Zion’s stock received:

Jocelyn’s original basis in the property she transferred of $46,200 + gain recognized of $0 – liability assumed by the corporation of $8,000 = $38,200