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In 2017, Susan Christian transferred a machine with a fair market value of $30,000 and an...

In 2017, Susan Christian transferred a machine with a fair market value of $30,000 and an adjusted basis of $40,000 to JPC Corporation in return for 60 shares of stock. The stock qualified as Code Sec. 124 stock and the transfer qualified under Code Sec. 351. In 2019, JPC Corporation liquidated due to bankruptcy and Susan's stock became worthless. What is Susan's tax position in 2019?

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Answer #1

As Susan has exchanged the machine against stock the profit earned on the same will be taxable.

The Fair Market Value of machine was $ 30,000

which has been exchanged with stocks for $40,000

Profit = $40,000 - $30,000 = $10,000

$10,000 is taxable in the hands of susan at the end of 2019.

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