Question

Tristan transfers property with a tax basis of $1,255 and a fair market value of $1,570 to a corporation in exchange for stock with a fair market value of $1,255 and $276 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $39 on the property transferred. What is the corporation's tax basis in the property received in the exchange

Answer 1

Answer: $1531

Explanation:

The corporation's tax basis in the property received in the exchange will be the addition of Tristan's Tax basis and the gain that's recognized on exchange by Tristan.

The gain realized will be:

= $1,570 - $1,255

= $315

Boot received = $276

Therefore, lower of $315 or $276 is $276.

The corporation's tax basis in the property received will then be:

= $1255 + $276

= $1531