Question

Antoine transfers property with a tax basis of $505 and a fair market value of $635 to a corporation in exchange for stock with a fair market value of $610 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $25 on the property transferred. What is Antoine's tax basis in the stock received in the exchange

Answer 1

Answer: $480

Explanation:

As Antoine transferred a property with a tax base of $505 for the stock, this is the new tax base the stock.

However, because the corporation assumed a liability of $25 on the property transferred, that $25 must be accounted for in the tax basis as a result of the transfer.

It is accounted for by simply deducting it from the Tax base,

= 505 - 25

= $480.

Antoine's tax basis in the stock received in the exchange is $480.