Pie Co.is transferring a depreciable asset to Berry Co.The asset has a fair market value of $200,000.The original cost of the asset was $175,000 and the undepreciated capital cost is $160,000.The two corporations wish to structure the transfer in a manner that will defer all taxes at this time.Pie Co.has no unused losses.Which of the following statements is incorrect?
A)For legal purposes, the asset will be sold for $200,000.
B)The elected value in the transfer for tax purposes will be $175,000.
C)The transfer can include cash or a note receivable to a maximum value of $160,000.
D)Pie Co.will receive shares from Berry Co.in the transaction.

Question

Quizplus · Accepted Answer

The elected value for tax purposes should be the undepreciated capital cost ($160,000) to defer all taxes, not the original cost ($175,000). This allows the transfer to occur without immediate tax implications, aligning with the goal of deferring all taxes at this time.

Pie CoIs Transferring a Depreciable Asset to Berry Co