Question
Loren and Tanya, sisters, each own 50% of a closely held corporation. They contributed the jointly held securities with a basis of $10,000 and a
Loren and Tanya, sisters, each own 50% of a closely held corporation. They contributed the jointly held securities with a basis of $10,000 and a value of $20,000 to their corporation in exchange for additional stock. Two weeks prior to the contribution, the sisters took out a bank loan for $8,000 using the securities as collateral and the corporation assumed the loan on the transfer. The funds were used to finance a week long family retreat at a resort area. Which of the statement below about this transaction is true?
Question options:
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| The sisters do not have a recognized gain on this contribution and have a total basis in the new stock of $10,000 |
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| The sisters do not have a recognized gain on this contribution and have a total basis in the new stock of $2,000 |
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| The sisters have a recognized gain of $8,000 on this contribution and have a total basis in the new stock of $10,000 |
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