Wally contributes land adjusted basis of $30,000; fair market value of $100,000) to an S corporation in a transaction that qualifies under § 351. The corporation subsequently sells the land for $120,000, recognizing a gain of $90,000 $120,000 - $30,000). If Wally owns 30% of the stock, $76,000 [$70,000 + 30%$20,000)] of the $90,000 recognized gain is allocated to Wally.

Question

Quizplus · Accepted Answer

The gain allocated to Wally should be 30% of the $90,000 recognized gain, which is $27,000, not $76,000.

Wally Contributes Land Adjusted Basis of $30,000; Fair Market Value