John Transfers Assets with a $200,000 FMV (Basis $160,000) and $170,000

question 1820

Multiple Choice

John transfers assets with a $200,000 FMV (basis $160,000) and $170,000 of business- related liabilities to a corporation in exchange for 100% of the corporation's stock with a FMV of $130,000. The corporation assumes the $170,000 mortgage. The transfer qualifies under Sec. 351. What is the corporation's basis in the property?

• A) $200,000
• B) $160,000
• C) $190,000
• D) $170,000

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Definitions:

Acquisition-Date Fair Value

The value of an asset or liability estimated at the date of acquisition based on its current market value.

Intra-Entity Debt Transactions

Financial obligations or loans between entities within the same corporate group, not necessarily evidenced in consolidated financial statements until settled externally.

Amortization Process

The systematic reduction of a loan or the spreading out of capital expenses over a fixed period of time.

Investment Account

An account holding securities, cash, and other assets managed by an investment dealer or manager for the benefit of the investor.