ExpertMedium1 markMultiple Choice
CPA · Question 57 · Area 4: Entity Tax Planning
Individual A incorporates a business. A contributes property (Basis $20,000, FMV $100,000) for 100% of the stock. A also receives $10,000 cash from the corporation. What is A's recognized gain?
Individual A incorporates a business. A contributes property (Basis $20,000, FMV $100,000) for 100% of the stock. A also receives $10,000 cash from the corporation. What is A's recognized gain?
Answer options:
A.
$0
B.
$10,000
C.
$80,000
D.
$90,000
How to approach this question
.
Full Answer
B.$10,000✓ Correct
Under Section 351(b), if boot is received, gain is recognized up to the amount of the boot. Realized gain is $80,000. Boot is $10,000. Recognized gain is $10,000.
Common mistakes
Recognizing the full realized gain.
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