Jenny transferred a factory building with an adjusted basis of $70,000 and a fair market value of $110,000 to the Crystal Corporation in exchange for 100% of Crystal Corporation stock and $20,000 cash. The building was subject to a mortgage of $25,000, which Crystal Corporation assumed. The fair market value of the stock was $75,000. Which are the amounts of Jenny's realized gain and recognized gain?
|FMV of property received||75,000|
|Add: loan relief||25,000|
|Less: basis in property given||(70,000)|
Gain recognized = lesser of (1) 50,000 realized gain and (2) 20,000 cash received = $20,000
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