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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Business

Araceli

10 March, 18:33

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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Answers (1)

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Gunner · Answer 1

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