Apply Formation And Termination Rules Practice Test

Petra transfers land with an adjusted basis of $40,000 and a fair market value of $100,000 to Newco Corp in exchange for stock worth $90,000 and cash of $10,000. The transfer otherwise qualifies under Section 351. How much gain must Petra recognize?

Under Section 721, a partner contributes property with an adjusted basis of $30,000 and a fair market value of $80,000 to a partnership in exchange for a 25% partnership interest. What is the amount of gain the partner recognizes on this contribution?