Axle Corporation acquires 100% of Drexel Corporation's stock from Drexel's shareholders for $500,000 cash. Drexel Corporation has assets with a $600,000 adjusted basis and an $800,000 FMV. The assets are subject to $200,000 in liabilities. Drexel Corporation shareholders purchased their stock eight years ago for $300,000. Axle Corporation's basis in the Drexel Corporation stock isA) $800,000. B) $600,000. C) $500,000. D) $300,000.

Question

George Miller

Business

21 April, 11:34

Axle Corporation acquires 100% of Drexel Corporation's stock from Drexel's shareholders for $500,000 cash. Drexel Corporation has assets with a $600,000 adjusted basis and an $800,000 FMV. The assets are subject to $200,000 in liabilities. Drexel Corporation shareholders purchased their stock eight years ago for $300,000. Axle Corporation's basis in the Drexel Corporation stock isA) $800,000. B) $600,000. C) $500,000. D) $300,000.

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Answers (1)

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Alan Murillo · Answer 1

C) $500,000

Explanation:

According to Section 1012, the basis for stock is the purchase cost of stock.

Axle Corporation's basis in the Drexel Corporation stock is $500,000.