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musickatia [10]
4 years ago
15

Tracy transfers property with a value of $60,000 and adjusted basis of $50,000 to form Riley Corp. solely in exchange for all 10

0 shares of Riley stock valued $60,000. What is Riley Corp.'s basis in the property
Business
1 answer:
Olin [163]4 years ago
4 0

Answer:

$60,000

Explanation:

Tracy's basis on the transfer is $50,000 and the amount realized is $60,000.

So Tracy should have a realized gain of $10,000, but Section 351 states that no gain or loss must be recognized when one person transfers property in exchange for a corporation's stock if immediately after the transfer, the person controls the corporation. In this case, Tracy will own 100% of Riley Corp., so she doesn't have to recognize any gain.

Riley Corp.'s basis on the property will be $60,000 which is equal to the fair market value and the value realized by Tracy.

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