a. Brett Nelson transfers a building having a $75,000 FMV and a $30,000 adjusted basis to Gator Corporation. An advantage of the asset transfer under Sec. 351 is that Brett can defer his $45,000 ($75,000 FMV − $30,000 adjusted basis) realized gain. What disadvantages accrue to Gator as a result of the post-transfer aspects of the transaction?
b. Assume the same facts as in Part a except that the building’s FMV is instead $30,000 and its adjusted basis is $75,000. What tax disadvantage results from the transfer as presently structured? Are there any suggestions that you can offer to Brett to improve his tax benefits?
c. Explain why the basis of gain property that is contributed to a corporation in a Sec. 351 exchange is not equal to its FMV on the date of the exchange. Is the basis of the property that is contributed to the corporation adjusted when gain is recognized by the transferor?
d. How would your answers to Part a change if Brett Nelson transferred a $25,000 mortgage along with the land and received stock having a value less than the amount of the liability?