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23 January, 22:32

Peyton contributes property to a corporation in exchange for its stock with a fair market value of $100,000. This transaction qualifies as a tax-free exchange, allowing Peyton to defer a $40,000 gain. What is Peyton's basis in the stock

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  1. 23 January, 22:46
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    Peyton's basis in the stock is $60,000

    Explanation:

    The transaction is a tax - free exchange which means that the transaction is exempt from any income taxation.

    To find out the Peyton's basis in the stock we will Subtract the Fair-market value of the transferred property to the Deferred gain.

    = 100,000 - 40,000

    = $60,000
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