d. Paul has a basis of $30,000 in the 25 shares He q e. None of the above. 33. R

Question

d. Paul has a basis of $30,000 in the 25 shares He q e. None of the above. 33. Rob and Sharon form Swallow Corporation with the following consideration: Adjusted Fair Market Basis $400,000 500,000 Value $400,000 440,000 From Rob- Cash From Sharon- Land Eachreceives 50% ofSwallows stock. In addition, Sharon receives cash of$40,000. One result ofthese transfers is that Sharon has a: a. Recognized loss of S60,000. b. Recognized loss of $20,000. c. Basis of $460,000 in the Swallow stock (assuming Swallow reduces its basis in the land to S440,000) Basis of $400,000 in the Swallow stock (assuming Swallow reduces its basis in the land to $440,000) None of the above. d. e.

Explanation / Answer

Since no quantitative information about stock is available, Sheron should recognize loss of $20000 as Land will be taken at Fair Market Value of $ 440000 incurring loss of $60000 and apart from it, Sheron is receiving cash of $40000.

Thus it is having Net Loss of $20000.

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