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10 May, 10:23

Ben and John formed BCD Inc., a corporation, in 2013. Ben received 80% of the voting common stock, the only class of stock and John received the remaining 20% of the stock. In 2014, Ben transferred additional property to BCD Inc. The property had an adjusted basis to Ben of $40,000 and a fair market value of $50,000 on the date of the transfer. On the same day, and in exchange for the property he transferred to BCD Inc., Ben received cash of $15,000 and additional stock worth $35,000. How much gain was recognized by Ben as a result of this transaction

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  1. 10 May, 10:39
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    Gain recognized by Ben = $10,000

    Explanation:

    Given dа ta:

    Adjusted basis of property=$40000

    Cash received = $15000

    Additional stock received = $35000

    Total received = Cash received + Additional stock received

    = $35000 + $15000

    = $50000

    Gain recognized by Ben = Total received - Adjusted basis of property

    =$50,000 - $40,000

    = $10,000

    Therefore, gain recognized by Ben = $10,000
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