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Maddie and Roxie each own 50% stock in POX, an S corporation. Maddie will assume Roxies responsibilities while Roxie takes an extended leave in exchange

Maddie and Roxie each own 50% stock in POX, an S corporation. Maddie will assume Roxies responsibilities while Roxie takes an extended leave in exchange for 35% of Roxies stock ownership, valued at $55,000. Maddies services are valued at $40,000. What is the treatment and recognized gain for Maddie on the transfer?

Treatment Recognized Gain

Gain recognized $15,000

Boot received $40,000

Section 351 transfer $0

Gross income $55,000

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