Another exact question which has 2 different answers: During 20X4, Hill and Dale

Question

Another exact question which has 2 different answers: During 20X4, Hill and Dale formed a corporation to which Hill transferred a patent right that had a FMV to him of $25,000 and a $0 adjusted basis. Dale transferred a building that had a FMV of $100,000 and an adjusted basis to him of $75,000. In return, Hill received 250shares and Dale received 750 shares of the corporation's 1,000 outstanding shares of its only class of stock. As a result of this transaction, Mr. Dale should report: A. a capital gain of $25,000 B. a Section 1250 gain of $25,000 C. an ordinary gain of $25,000 D. neither a gain nor a loss. Both A & D are shown as the answer. What is the correct answer??

Explanation / Answer

As Hill and Dale own more than 80% of stock in the corporation so they are in control of the conrporation according to Section 351, no gain or loss is to be recognized on the transfer of property under Sec 351. Option D neither a gain nor a loss is correct

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.