Roy Transfers Property with a Tax Basis of $800 and a Fair

question 48

Multiple Choice

Roy transfers property with a tax basis of $800 and a fair market value of $500 to acorporation in exchange for stock with a fair market value of $400 and $50 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed aliability of $50 on the property transferred. What is Roy's tax basis in the stock receivedin the exchange?

• A) $500.
• B) $750.
• C) $700.
• D) $800.

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Definitions:

Process Costing

An accounting methodology used for homogenous products, which accumulates production costs and then allocates them to large numbers of identical units.

Conversion Costs

The combined costs of direct labor and manufacturing overhead, which are incurred to convert raw materials into finished products.

Process Costing

A costing methodology employed in industries where production is continuous, assigning costs to units of product based on the processes they go through.

Weighted-Average Method

A method of costing inventory that calculates the cost of goods based on the average price of all similar items available throughout the period.