Broom Corporation Transfers Assets with an Adjusted Basis of $300,000

question 19

Multiple Choice

Broom Corporation transfers assets with an adjusted basis of $300,000 and an FMV of $400,000 to Docker Corporation in exchange for $400,000 of Docker Corporation stock as part of a tax-free reorganization. The Docker stock had been purchased from its shareholders one year earlier for $350,000. How much gain do Broom and Docker Corporations recognize on the asset transfer?

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Definitions:

Corporation

A legal entity recognized by law as separate from its owners, with its own rights, privileges, and liabilities.

Limited Partnership

A form of partnership consisting of one or more general partners who have full liability and one or more limited partners whose liability is limited to the amount of their investment.

Limited Liability Company

An enterprise framework combining the corporation's limited liability safeguard with the tax efficiency found in partnerships or sole proprietorships.

Fiduciary Duty

A legal obligation of one party to act in the best interest of another when entrusted with care of their assets or interests.