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Dave forms a corporation and transfers property having a basis to him of $22,000 and a fair market value of $29,000 to the corporation for 1,000 shares of $11 par stock. One year later, Hank transfers property having a basis to him of $3,500 and a fair market value of $4,500 for 100 shares of the stock. Hank is not related to Dave. The corporation issued no other stock.

(a) How much gain does Dave recognize on his exchange? What is the basis to Dave of his 1,000 shares?

(b) What gain or loss is recognized by the corporation when it issues its shares to Dave? What is the basis to the corporation of the property it received from Dave?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M946103

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