Question

Peyton contributes property to a corporation in exchange for its stock with a fair market value of $100,000. This transaction qualifies as a tax-free exchange, allowing Peyton to defer a $40,000 gain. What is Peyton's basis in the stock

Answer 1

Answer:

Peyton's basis in the stock is $60,000

Explanation:

The transaction is a tax- free exchange which means that the transaction is exempt from any income taxation.

To find out the Peyton's basis in the stock we will Subtract the Fair-market value of the transferred property to the Deferred gain.

= 100,000 – 40,000

= $60,000