Jack transferred a building that had an adjusted basis of $75,000 and a fair market value of $130,000 to R Corp. in exchange for 80% of R's only class of stock and a car with an adjusted basis to R of $25,000. The FMV of the stock at the time of the transfer was $100,000 and the car's FMV was $30,000. How much gain must R recognize on the exchange?

A. $30,000

B. $5,000

C. $100,000

D. $105,000

Question

Business

Bridge

23 February, 05:59

Jack transferred a building that had an adjusted basis of $75,000 and a fair market value of $130,000 to R Corp. in exchange for 80% of R's only class of stock and a car with an adjusted basis to R of $25,000. The FMV of the stock at the time of the transfer was $100,000 and the car's FMV was $30,000. How much gain must R recognize on the exchange?

A. $30,000

B. $5,000

C. $100,000

D. $105,000

+5

Answers (1)

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Estrella Lindsey · Answer 1

A. $30,000

Explanation:

Jack realises gain of (100000 FMV of stock + 30000 FMV of car - 75000 Adjusted basis)

$ 55000

Jack recognises gain of $ 30000 i. e the FMV of the property (car) other than the stock received.

Therefore, The amount of gain that R must recognize on the exchange is $30,000.