SYBIL transfers property with a tax basis of $5,000 and a fair market value of $6,000 to a corporation in exchange for stock with a fair market value of $3,000 and $2,000 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $1,000 on the property transferred. What is Sybil's tax basis in the stock received in the exchange? A. $6,000 B. $5,000 C. $4,000 D. $3,000 D. $3,000

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23 February, 19:36

SYBIL transfers property with a tax basis of $5,000 and a fair market value of $6,000 to a corporation in exchange for stock with a fair market value of $3,000 and $2,000 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $1,000 on the property transferred. What is Sybil's tax basis in the stock received in the exchange? A. $6,000 B. $5,000 C. $4,000 D. $3,000 D. $3,000

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Esperanza Kemp · Answer 1

D. $3,000

Explanation:

The shareholder's tax basis =

SYBIL tax basis in the property transferred + gain recognized - cash received of $2,000 - the liability assumed by the corporation.

$5,000 + $1,000 - $2000 - $1,000 = $3,000.

If Sybil sells the stock for $3,000, no gain or loss will be recognized, an amount equal to the gain deferred of $0.