Chi transfers assets with a $150,000 FMV (basis $80,000) and $100,000 of business-related liabilities to a corporation in exchange for 100% of the corporation's stock with a FMV of $50,000. The corporation assumes the $100,000 mortgage.a.What is the amount of gain recognized by Chi?b.What is the adjusted basis of the stock received by Chi?c.What is the basis of the assets to the corporation?
What will be an ideal response?
| a. | FMV of stock received | $ 50,000 |
| Plus: Liabilities assumed by corporation | 100,000 |
| Amount realized | $150,000 |
| Less: Adjusted basis of property | 80,000 |
| Gain realized | $ 70,000 |
| Gain recognized (Excess of debt over basis ($80,000 - 100,000)) | $ 20,000 |
| b. | Adjusted basis of property transferred | $ 80,000 |
| Plus: Gain recognized by Chi | 20,000 |
| Minus: Liability assumed by the corporation | ( 100,000) |
| Adjusted basis of stock received | $ 0 |
| c. | The corporation's basis in the assets is $80,000 (adjusted basis of the property) plus $20,000 |
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