The land now has potential soil and groundwater problems

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Reference no: EM131292145

Mr. Smith is an accrual basis taxpayer with multiple lines of businesses. One business is a gas station. The land underneath the gas station did not appear contaminated when Mr. Smith purchased it. However, the land now has potential soil and groundwater problems (environmental liabilities). Mr. Smith engaged in a section 351 tax free exchange transferring the gas station to a new subsidiary XYZ in exchange for the stock of XYZ and the assumption of the environmental liabilities. Before the transfer, Mr. Smith did not take any environmental remediation efforts to clean up the land’s soil and groundwater problems. How is the basis of Mr. Smith’s land determined?

Reference no: EM131292145

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