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JKCPA
JKCPA, CPA
Category: Tax
Satisfied Customers: 5884
Experience:  CPA with tax experience.
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Algernon Amsley transferred the following to his controlled

Resolved Question:

Algernon Amsley transferred the following to his controlled corporation in exchange for stock:

Basis Value
Building $20,000 $50,000
Cash 10,000 10,000
Mortgage on building 40,000 40,000
IBM stock 15,000 12,000

Algernon must recognize a gain of:

a. $20,000
b. $0
c. $10,000
d. $27,000
Submitted: 6 years ago.
Category: Tax
Expert:  JKCPA replied 6 years ago.
Hi Customer,

Thanks for your question.

The answer is b. $0.
Even though the building mortgage exceeds the building’s basis, it is still short of the aggregate basis transferred including cash.

Hope this helps!
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