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

question 73

Essay

Baxter Corporation transfers assets with an adjusted basis of $300,000 and an FMV of $500,000 to Duke Corporation for 90% of Duke's single class of stock worth $500,000. The Duke stock is then exchanged for Frank's 50% interest in Baxter Corporation. Frank's basis in the Baxter stock he surrenders is $120,000. What is Frank's basis in the Duke stock he receives?

---

Definitions:

Representativeness Heuristic

A cognitive shortcut that involves making judgments about the probability of an event under uncertainty, based on how much it resembles the typical case.

Three-Number Sequence

A specific arrangement of three numbers that follows a particular rule or pattern, often used in cognitive and psychological testing.

Confirmation Bias

The tendency to search for, interpret, favor, and remember information in a way that confirms one's preexisting beliefs or hypotheses.

Communication Episode

A specific instance of communication that includes a series of interactions and the context in which it takes place.