Sybil Transfers Property with a Tax Basis of $5,000 and a Fair

question 75

Multiple Choice

Sybil transfers property with a tax basis of $5,000 and a fair market value of $6,000 to a corporation in exchange for stock with a fair market value of $3,000 and $2,000 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $1,000 on the property transferred. What is Sybil's tax basis in the stock received in the exchange?

• A) $6,000
• B) $5,000
• C) $4,000
• D) $3,000

---

Definitions:

Product Costs

Product costs are the direct expenses associated with manufacturing a product, including direct labor, raw materials, and manufacturing overhead.

Prime Costs

The combination of direct material and direct labor expenses incurred in producing a product.

Direct Materials

Raw materials that can be directly traced to the production of finished goods, considered a variable cost and included in the calculation of the cost of goods sold.

Direct Labor

The wages and other compensation paid to employees who are directly involved in the production of goods or services.