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Rachelle transfers property with a tax basis of $825 and a fair market value of $1,300...

Rachelle transfers property with a tax basis of $825 and a fair market value of $1,300 to a corporation in exchange for stock with a fair market value of $700 and $214 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $386 on the property transferred. What is the corporation's tax basis in the property received in the exchange?

Multiple Choice

  • $1,300

  • $1,039

  • $825

  • $700

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Answer #1
Corporation's tax basis in the property received in the exchange will be shareholder's tax basis plus gain recognized.
Shareholder's tax basis 825
Add: Gain recognized 214
Corporation's tax basis 1039
Option B $1,039 is correct
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