On April 2 of the current year, Jana transfers land with a basis of $140,000 and a fair market value of $120,000 to Amish Corporation in exchange for all of its stock. She had originally acquired the land on December 1, 2002. What tax issues arise from the exchange?
What will be an ideal response?
• Does the property transfer meet the Sec. 351 requirements?
• Has Jana transferred property?
• Is Jana in control of the corporation following the transfer?
• What is Jana's recognized gain?
• What is Jana's basis for her stock?
• Should Jana elect to take a reduced basis in the stock so that Amish will have a $140,000 basis in the land?
• What is Jana's holding period for her stock?
• Does Amish Corporation recognize gain when it issues its stock?
• What is Amish Corporation's basis for the property received from Jana?
• What is Amish Corporation's holding period for the property received from Jana?
The property transfer meets all the Sec. 351 requirements. Neither Jana nor Amish has gain or loss on the exchange. Jana can elect to take a basis of $120,000 in the Amish stock and Amish will have a $140,000 basis in the land. If no election is made, Amish will have a basis of $120,000 in the land and Jana's basis in the stock is $140,000. If Amish has a basis of $120,000 in the land, its holding period for the land will begin on the day after the exchange. If Amish takes Jana's basis of $140,000 and Jana reduces her basis in the stock, Amish's holding period for the land begins on December 2, 2000. Jana's holding period for the stock includes the period for which she held the land.
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