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

question 1

Multiple Choice

Ashley transfers property with a tax basis of $5,000 and a fair market value of $3,000 to a corporation in exchange for stock with a fair market value of $2,000 and $500 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $500 on the property transferred. What is Ashley's tax basis in the stock received in the exchange?

• A)$5,000
• B)$4,000
• C)$3,000
• D)$2,000

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Definitions:

Right to Cure

A legal provision that allows a party in breach of contract an opportunity to fix or "cure" the breach within a designated period.

Performance

In contract law, the situation that exists when the parties to a contract have done what they had agreed to do.

Tender of Performance

An offer by one party to perform their obligations under a contract, typically involving the offer to pay a sum of money or to perform a specific act.

Cashier's Check

A check guaranteed by a bank, drawn on the bank's own funds and signed by a cashier, often used for significant transactions where the payment needs to be secure.