Roberta Transfers Property with a Tax Basis of $406 and a Fair

question 121

Multiple Choice

Roberta transfers property with a tax basis of $406 and a fair market value of $598 to a corporation in exchange for stock with a fair market value of $345 in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $253 on the property transferred. What is the amount realized by Roberta in the exchange?

• A)$598
• B)$406
• C)$345
• D)$299

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Definitions:

Due Care

Due care refers to the effort made by an individual or entity to avoid harm to other people or their property, acting with the prudence and attention that a reasonable person would exercise in similar circumstances.

Product Liability

The legal liability a manufacturer or trader incurs for producing or selling a faulty product.

Negligence

The failure to exercise the care that a reasonably prudent person would exercise in similar circumstances, resulting in harm or damage.

Design Defect

A flaw in the planning or design of a product that makes it inherently unsafe or faulty.