o. (12 points) In exchange for voting stock, Barry contributes property to ABC c
ID: 2561389 • Letter: O
Question
o. (12 points) In exchange for voting stock, Barry contributes property to ABC corporation as p qualifying Section 351 exchange. The property is encumbered with a mortgage o mortgage of $20,000, has a FMV of $320,000 and a tax basis of $140,0 business purpose to Barry incurring this $100,000 mortgage on the property. In addition, the assumes the second liability of Barry's, in an amount equal to $20,000. This $2 Barry's, incurred on a recent visit to Las Vegas. There was no valid business purpose to this latter assu f $100,000 and a second 00 to Barry. There was a valid 0,000 was a gambling d a) what is barry's recognized gain, if any, from the exchange? b) What is Barry's tax basis in his stock? c) What is the corporation's tax basis in the property D Debt o,ooExplanation / Answer
A. In case of qualified section 351 exchange, if property contributed in exchange of voting stock and no boot is received, then no gain or loss shall be recognized. In this case, Barry contributes his property in exchage of voting stock as a part of qualified section 351 exchange. Berry has not recievd in Boot in this exchage. Hence no recognized gain in this exchange.
B. Barry's tax basis on stock is generraly the adjusted basis of the proerty contributed to corporation. here tax basis of property is $1,40,000 and mortgage of $ 20,000 was due to gambling loss of Barry. So the adjusted basis of property is $1,20,000. Hence Barry's tax basis on stock is $ 120,000.
c. Corporations tax basis on property generally same as tax basis of the stock. Hence answer is $120,000.
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