Julian transferred 100 percent of his stock in Lemon Company to Apricot Corporation in a Type B stock-for stock exchange. In exchange, he received stock in Apricot with a fair market value of $200,000. Julian's tax basis in the Lemon stock was $400,000. What amount of loss does Julian recognize in the exchange and what is his basis in the Apricot stock he receives?

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Business

Serenity Small

3 January, 06:04

Julian transferred 100 percent of his stock in Lemon Company to Apricot Corporation in a Type B stock-for stock exchange. In exchange, he received stock in Apricot with a fair market value of $200,000. Julian's tax basis in the Lemon stock was $400,000. What amount of loss does Julian recognize in the exchange and what is his basis in the Apricot stock he receives?

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Chandler Hull · Answer 1

Here no loss would be recognized by Julian on the transfer of shares and his basis inn Apricot corporation would be $400,000.

Explanation:

In the case of transfer of share made by Julian (from Lemon company to Apricot company), no loss would be recognized by him, as the loss or gain would have been recognized only when the sale was made but that didn't happened.

His basis in the Apricot corporation would be equal to his tax basis in the Lemon company, so therefore his basis is equal to $400,000.