What is the corporation basis in the assets

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Question - In a sec. 351 transaction, Sam, a cash-basis taxpayer, transfers land with a FMV of $100, basis of $30, and liability of $55 that the corporation assumes, plus $60 of accounts receivable with a basis of zero. The liability is part of the purchase price of the land, which was purchased 5 years ago. Sam receives stock with a FMV of $105. The corporation elects to became a cash-basis, calendar-year taxxpayer. The corporation collects $60 of the accounts receivable and pays the liability in its first year of operations.

a. How much gain does Sam recognize, what is his basis in the stock received, and what is the corporation's basis in the assets?

b. Who is taxable on the accounts receivable when they are collected and what is the effect of the debt repayment?

c. Assume instead the liability is accounts payable. What result?

d. How would your answers be different if Sam were an accrual-basis taxpayer?

Reference no: EM133108826

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