Carlos Transfers Property with a Tax Basis of $500 and a Fair

question 2

Multiple Choice

Carlos transfers property with a tax basis of $500 and a fair market value of $800 to a corporation in exchange for stock with a fair market value of $650 and $50 in cash in a transaction that qualifies for deferral under section 351. The corporation assumed a liability of $100 on the property transferred. What is the corporation's tax basis in the property received in the exchange?

• A)$800
• B)$600
• C)$550
• D)$450

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Definitions:

Credit Purchase

Buying goods or services and deferring payment to a later date, typically recorded as accounts payable.

Liabilities

Economic responsibilities or liabilities a corporation has towards other entities, necessitating repayment through transferring assets like money, merchandise, or services eventually.

Assets

Economic resources controlled by a business, capable of producing value, and are expected to benefit future operations, including cash, inventory, and property.

Creditors' Claims

Rights of lenders to receive payment from a borrower or from a borrower’s assets.