A owns stock (basis: $100) in a closely-held corporation which is engaged in the business of developing a new sensor-based computer system. To date, no product has been developed and the future prospects of the company are in doubt. A sells the stock to B for $60 plus 20% of the company's net profits over the next 10 years.

How should he report this transaction for federal income tax purposes (ignore §453)? What is B's basis in the stock?

Answer rating: 100% (QA)

The transaction should be reported for federal income tax purposes as a ... View the full answer