Exercise $4-20($LO$.1,2)$

Grady exchanges property with a basis of $$12,000$ and fair market value of $$18,000$ for $60\%$ of the stock of Eadie Corporation. Pedro acquired the other $40\%$ of the stock five years ago.

Calculate Grady's current income, gain, or loss and the basis he takes in his shares of Eadie stock as a result of this transaction.

Because this transaction does not meet $$ the control of the corporation requirement, Grady has a gain $$ of

$$ and $$ basis in his shares of stock.

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The three requirements for nonrecognition of gain or loss under $$351$ are that $(1)$ property is transferred $(2)$ in exchange for stock and $(3)$ the property transferors are in control of the corporation after the exchange.