Question

19. Shaquille transfers two assets to a newly-created corporation. The first asset has an adjusted basis of $40,000 and an FMV of $50,000. The second asset has an adjusted basis of $35,000 and an FMV of $25,000. Shaquille receives stock with an FMV of $66,000 and $9,000 cash. Shaquille must recognize a gain of

A) $4,000.

B) $5,000.

C) $6,000.

D) $7,000.

20. Chan transfers property with an adjusted basis of $65,000 and an FMV of $70,000 to Wallis Corporation in a Sec. 351 transaction. Chan receives stock worth $60,000 and a short-term note having a $10,000 FMV. Chan's basis in the stock is

A) $60,000.

B) $65,000.

C) $70,000.

D) $75,000.

21. Rhiana transfers land with a basis of $40,000 to Styx Corporation in exchange for 100% of Styx's stock. At the date of the transfer, the land had a $30,000 fair market value. Absent an election by Rhiana, Styx's basis in the land is

A) $30,000.

B) $35,000.

C) $40,000.

D) $70,000.

Answer 1

1. Shaquille

C. $6,000

Particulars	Asset One	Asset Two	Total
FMV	$50,000	$25,000	$75,000
Minus : Adj Basis	$40,000	$35,000	$75,000
Realized Gain (Loss)	($10,000)	$10,000	$0
Boot Allocation	$6,000	$3,000	$9,000
Recognized Gain (Loss)	$6,000	$0	$6,000

2. Chan

A. $60,000

Particulars
FMV	$70,000
Minus : Adj Basis	$65,000
Realized Gain (Loss)	($5,000)
Boot Allocation	$10,000
Recognized Gain (Loss)	$5,000
Particulars
Transafror Basis	$65,000
Minus : FMV of Boot	($10,000)
Plus : Gain Recongnized	$5,000
Transferor Stock Basis	$60,000

3. Rhiana

C. $40,000

The transaferor basis shall be considered as Styx's basis in the Land, as the transfer is in exchange for 100% of Styx's Stock.