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Tristan transfers property with a tax basis of $1,245 and a fair market value of $1,750 to a corporation in exchange for stock with a fair market value of $1,245 and $399 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $106 on the property transferred. What is the corporation's tax basis in the property received in the exchange

Respuesta :

Answer: $1644

Explanation:

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

Gain realized = 1750 - 1245 = 505

Boot received = 399

The gain recognized on the exchange will the value that's lower between the gain realized which is $505 and the boot received which is $399. Therefore, gain recognized = $399.

The corporation's tax basis will then be:

= Tristan Tax basis + Gain recognized

= 1245 + 399

= 1644

The corporation's tax basis in the property received in the exchange would be $1644.

What is the calculation of corporate tax?

The gain realized would be;

[tex]1750 - 1245\\ = 505[/tex]

Now, the boot received was given as $399. It means gain recognized would be the value that is lower between gain realized and boot revived, that is, $399.  

Therefore, a corporation tax would be;

[tex]1245 + 399\\=1644[/tex]

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