Jane transfers property (basis of $180,000 and fair market value of $500,000) to Green Corporation for 80% of its stock (worth $425,000) and a long-term note (worth $75,000), executed by Green Corporation and made payable to Jane. As a result of the transfer:a. Jane recognizes no gain. b. Jane recognizes a gain of $75,000. c. Jane recognizes a gain of $270,000. d. Jane recognizes a gain of $320,000. e. None of the above.

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Business

Hunter Le

20 May, 17:22

Jane transfers property (basis of $180,000 and fair market value of $500,000) to Green Corporation for 80% of its stock (worth $425,000) and a long-term note (worth $75,000), executed by Green Corporation and made payable to Jane. As a result of the transfer:a. Jane recognizes no gain. b. Jane recognizes a gain of $75,000. c. Jane recognizes a gain of $270,000. d. Jane recognizes a gain of $320,000. e. None of the above.

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Max Dyer · Answer 1

B) Jane recognizes a gain of $75,000.

Explanation:

§ 351 allows individuals or businesses tax free transfers to controlled corporations. In other words, Jane can transfer assets to Green Corporation without recognizing any gain or loss.

Since Jane received some money from this transaction (long term note for $75,000), that must be considered a gain since it is not included under § 351.