Ernie receives all the stock of EBU Company in exchange for contributing a machine with a basis of $15,000 and an FMV of $25,000. Ernie also receives $3,000 cash from the company. The gain on transfer is $10,000 (the difference between the basis and FMV of the machine). The gain Ernie must report is $3,000, the lower of gain or cash received.

Answer rating: 100% (QA)

The analysis of the scenario is partially correct Lets break it down Gain on Transfer This is accura... View the full answer