Bob transfers property in a §351 exchange with an adjusted basis of $10,000 in e
ID: 2431527 • Letter: B
Question
Bob transfers property in a §351 exchange with an adjusted basis of $10,000 in exchange for stock of the corporation with a fair market value of $8,000, $3,000 cash, and the assumption by the corporation of indebtedness of $4,000. The indebtedness assumed by the corporation was loan that Bob took out to pay his individual income taxes in a prior year. What is the gain recognized on the transfer?
A. $0, since this transfer is subject to the non-recognition rule of §351
B. $5,000
C. $4,000
D. $10,000
Explanation / Answer
A. $0, since this transfer is subject to the non-recognition rule of §351
It is in accordance with the US code §351, if property is transferred to a Corporation in exchange of its stock, no gain or loss would be recognized.