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25 November, 15:09

Alexie transfers land valued at $250,000 (her basis = $220,000) to Sorenson Corp. in exchange for Sorenson common stock valued at $210,000 and cash of $40,000 in a Section 351 transaction. What is Alexie's recognized gain and her basis in Sorenson stock?

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  1. 25 November, 15:10
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    A. $30,000 gain recognized

    $210,000 Basis

    B. The gain which was recognized will be the lesser of the amount of the gain realized.

    Explanation:

    Alexie's recognized gain and her basis in Sorenson stock would be:

    a) land valued $250,000 - Basis $220,000 = $30,000

    This means that the $30,000 will be gain recognized and her basis will be $210,000

    b) The gain which was recognized will be the lesser of the amount of gain realized which is

    (Land value $250,000 - Basis $220,000 = $30,000)

    Less FMV of the boot received which is $40,000 = $210,000
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Home » Business » Alexie transfers land valued at $250,000 (her basis = $220,000) to Sorenson Corp. in exchange for Sorenson common stock valued at $210,000 and cash of $40,000 in a Section 351 transaction.
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