# IRC Section351: Basis for Randy's ## Overview Randyires stock in North Corporation in a that qualifies for IRC Section 351 The basis of stock depends on the transferor’s basis in the property transferred, adjusted by any additional consideration. --- ## Details of the Transfer | Transferor | Asset | Transferor's Adjusted Basis | FMV | Consideration Received | |--------------|-------------|------------------------------|-----------|------------------------------------------| | Paul | Machinery | $12,500 | $25,000 | Consideration not explicitly specified, assumed to be the machinery itself. | | Randy | Land | $18,000 | $25,000 | 40 shares of North stock (value not specified directly) and a $5,000 note. | | Steven | Cash | $17,500 | $35,000 | 35 shares of North stock (value not specified directly). | *Note:* The shares are all of North's outstanding stock (100 shares total). --- ## Step 1: Determine Randy's basis in the property transferred ### Land transferred by Randy: - **Adjusted basis:** $18,000 - **FMV:** $25,000 ### Consideration received: - **Shares:** 40 shares (value not specified, but implied to be part of FMV) - **Note:** $5,000 ### Step 2: Calculate Randy's basis in the stock **General rule under IRC Section 351:** \[ \text{Basis of stock received} = \text{Adjusted basis of property transferred} + \text{Gain recognized} - \text{Liability assumed} - \text{Other considerations} \] Since Randy transfers property in exchange for stock and a note, his basis in the stock is: \[ \text{Randy's basis in stock} = \text{Adjusted basis of property transferred} + \text{Liability transferred} - \text{Cash received} (if any) \] **In this case:** - Adjusted basis of property transferred by Randy: **$18,000** - The note is a liability assumed by the corporation: **$5,000** Assuming the note is part of consideration, Randy's basis in the stock is: \[ \boxed{ \text{Basis} = \$18,000 + \$5,000 = \$23,000 } \] --- ## **Answer:** **Randy's basis in the North Corporation stock is \(\boxed{\$23,000}\).**